Roll up, Roll up, Round two of the Great Howard Fire Sale is here!
We’re under New Management, so let’s have a look at what we have on the block today.
We’ve got Medibank, ACS, AGS (don’t worry about acronyms, we’ll get to them later), Australia Post, Australian Rail and state power companies. Get your bargains here!
The Liberals and Nationals have wasted no time setting up shop again in the temple. Apparently not satisfied with the billions of public assets sold under the Howard/Costello stewardship, the new government is looking at selling off anything that even appears to compete with private businesses, regardless of any contribution to the public good or the public purse.
Sales of public assets are often touted as solutions to a debt crisis. The reality is they are a sugar hit for politicians to improve their numbers, and corporations to receive handouts from the public purse.
One thing always missing from the conversations about debt and privatisation is the public interest. For example, was it truly in the public interest to sell Telstra’s copper infrastructure, our major airports, or most of our gold reserves?
Public assets are historically undervalued, and when sold often undergo massive downsizing and service retractions. In the brave new world of asset stripping and collateralized debt obligations the Australian public needs to take a closer look at what Public Corporations are, what services they provide, what they represent, and what impact their sale would have on the current shareholder… the Australian public.
ACS pty ltd
Formerly known as the Australian Submarine Corporation, this is the primary naval defence contractor for the nation, responsible for the ongoing maintenance of the Collins class submarine fleet, and is currently building our next generation Air Warfare Destroyers.
The company engages thousands of people and businesses, mainly in South & Western Australia, and took many years and billions of tax-payer investment to build it to its current capability.
A quick look at the annual report for 2013 shows that in addition to maintain and building our defence capabilities it made a reasonable return and now holds over $619 million in assets:
Return on equity 4.2%
Dividend $8.9 Million
Paid taxes worth $3.2 Million
This company is a monopoly. It is the only company in the nation capable of building military class naval vessels and the only one who can service our submarines. This means any changes of ownership will have a direct impact on our national security.
No other company will ever be able to compete with ACS due to the massive infrastructure investment required. How can a government put a sale price on that kind of leverage?
If the sale does go ahead, how convenient that ex-Indi rep Sophie Mirabella has been given a golden parachute to corporate boardship. One wonders which of the large foreign defence contractors would end up owning our naval fleet capabilities, and what Mirabella’s position would be on national security versus company profits.
The Australian Government Solicitor provides legal advice to the government; it was established at Federation and set up explicitly to act in the national interest.
This is a legal practice wholly owned by the commonwealth, which has access to some of the deepest policy secrets of the government.
The AGS website proudly proclaims that it beats private firms due to its knowledge and experience of government work. The sale of the firm would be a wholesale delivery of a huge amount of expertise and knowledge into private hands. How can there be a meaningful price tag attached to the information bank, integrity & goodwill belonging to this firm?
The high potential for conflict of interest or corruption gives pause enough. And given that the beneficiaries would only be lawyers able to charge the tax-payer higher rates for their services; how would it be in the public interest to sell?
Australian Rail Track Corporation Ltd
Responsible for over 8 thousand kilometres of interstate rail, the ARTC was established as a single entity for business to contact to arrange freight by rail throughout Australia. Such was the importance placed on the rail that carries our mining and farming products to port, that both state and federal governments agreed to establish the integrated body.
Privatisation of rail has failed in the UK, with service cuts, fare hikes, and under-investment in infrastructure. A situation many in Australian urban centres would be familiar with.
Similar stories of sales or deregulation of freight & mass transit exist all over the world. In the USA the iconic Greyhound bus service now completely gutted thanks to deregulation and forced to cut services to thousands of rural towns. The cities fare no better, with large cuts to bus & rail that disproportionally impact on low-pay workers.
Land and agricultural resources are vital to the Australian economy, this puts rail infrastructure into the ‘national security’ category. To sell the ARTC, most likely to a foreign multinational, is to put our future prosperity up for ransom.
The sale of Medibank is apparently justified by the fact that it is competing with private businesses. The same argument could be made that Police are competing with private security firms, so should we be selling the police as well?
Medibank covers 29% of the Australian market, or approximately 3.8 Million people. There are few health insurers who would not want a piece of that pie. The annual report is positively glowing:
Return on equity 15.4%
Dividend $450 Million
Paid taxes worth $82 Million
As part of servicing a public need Medibank launched AHM, the only insurance that actually spells out (literally in black & white) what cover you need to avoid the Medicare levy, and to stop the Lifetime Health Cover age tax.
Medibank is not a drain on the public purse; it is a leader and award winner in promoting community health; and a leader in the insurance community for high standards.
Finally, it is paying millions of dollars every year in dividends into the public purse. Given the constant cat-calls for government to be run like a business, it is surprising that there should be opposition to a government property that is making money… for the government. The only argument for selling Medibank is ideological, as there is no benefit to the public interest.
On the one hand the Liberals and Nationals want the local postie to process your Centrelink forms, on the other they want to sell it.
Given that the coalition wants to shut down the Clean Energy Finance Corp, which is currently earning the tax-payer $200 million per year. It is perhaps unsurprising that they also want ape their UK Tory counterparts who forced a partial privatization of the Royal Mail in the UK in spite of increasing profits.
Some articles are already inserting misinformation about Australia Post having an “ailing bottom line”, the same tactic used by the UK Tories. The reality is Aus Post paid a massive 18.5% return on equity last year, all “during a period when addressed letters are declining”.
Compare this to the struggles of U.S. Mail. Some have been arguing that the problems at U.S. Mail are due to unions and no lay-off clauses. The reality is that the organisation has been reliant on low-skill, low-pay workers to keep overheads down and failed to automate or innovate. In addition U.S. Mail has to contend with government laws that prevent managers making sensible business decisions to restructure or diversify their business base.
This is the success of the Australia Post Corporation; it continues to deliver it’s regulated community service obligations while turning a profit. It has shaken off the assumption that it was an out-of-date institution and built itself into a truly modern business that is making serious money for the tax-payer:
Return on equity 18.5%
Dividend $243.7 Million
Paid taxes worth $447.3 Million
Australia Post is another huge monopoly, with massive infrastructure and service commitments. Regional Australia and many urban communities rely heavily on their post office for far more that buying stamp or sending parcels.
When you read current CEO Ahmed Fahour commenting that community service obligations are ‘stifling’ business, it is easy realise that after privatisation regional and ‘unprofitable’ services would be the first items to be stripped bare.
As illustrated above, ideologically driven arguments for privatisation do not balance when weighed against the Public Good. Interest rates for government loans are at historical lows so debt hysteria is completely invalid. And why sell money-making enterprises that will assist in paying back the debt? Why sell the golden geese?
An interesting attribute that is common across all of these commonwealth companies is that they are flagships in their arenas. This is because they serve a public need and are capable of having long-term goals beyond mere money making. These public bodies create new markets and build new products & innovations that private enterprise does not have the courage or resources to accomplish.
The entire premise of establishing a public corporation is to allow essential services like remote mail services, or secure rail transport, to be funded by the profits from the corporation’s unregulated activities. Australia Post is a classic example; in 2013 regulated services lost money, other services covered the loss and made a profit overall. The original NBN Co was another; it planned to use profits from urban areas to subsidise connectivity in Regional Australia.
Far from being a two-step process toward privatisation, public corporations need to be maintained as fiscally responsible ways for government to provide for the needs of the nation and spurring innovation, while giving private businesses the opportunity to benefit from new markets and reliable delivery infrastructure.
The corporations and political enablers that prey on these public assets do not care about the base-line services that they provide, only in the short-term profits that they can cleave.
Before Australia sells off its hard-bought Tax-Payer assets, perhaps we should take a closer look and see why private corporations are so eager to get their hands on them.