Selling the furniture – Privatising Australia

Written by Grant Mills on . Posted in News, Politics, Society

With the incoming Abbot government came a promise of a Commission of Audit – a wide-ranging assessment of Government assets – ostensibly to fulfil their electoral promise on cutting down on wasteful government expenditure.

(Anyone that had their ears open to Joe Hockey prior to the election would not have missed his constant bleating over the Labor Government spending $180,000 on studying ergonomic chairs – a number that was in fact wrong by several magnitudes, according to the Department of Human Services – but let’s not get caught up on that.)

The Commission of Audit is a good idea, but wielded in the hands of the austerity leaning Liberals it’s natural to be suspicious that ‘wasteful government spending’ will equate to ‘fewer public servants and services’.

Yet it seems that a secondary, and far more sinister and irreversible, motive for the Audit is to gauge whether numerous public assets, such as Australia Post, really do need to remain in public hands. In brief: privatisation.

Photo: Angus Mordant via BRW

Photo: Angus Mordant via BRW

In what seems an almost too convenient dichotomy – as if the last century of Australian politics were a Dickens novel – Labor has been the party of the big spend, winning their votes with public cash and infrastructure outlay, while the conservatives have held up a shiny and surplus-yielding economy for their stamps of approval. What the coffers lost on the swings it made up on the roundabouts.

Yet Liberal surpluses have often been made up with the sale of public assets (though their ranks are joined by the Labor Prime Minister Paul Keating  – who was also slash happy)

During this current election gauntlet promises were extracted from Tony Abbott that none of Australia’s broadcasters – the ABC or SBS – were on the books to be privatised but since the election it has come to light that such institutions as Australia Post and Medibank Private will not escape evaluation for sale.

Yet despite the cash influx afforded by asset sale, and the ongoing tax paid by the non-private business, privatisation almost across the board, leads to higher prices for consumers, and in the long term, less revenue for the government.

Let’s take electricity as an example. The carbon tax may currently be getting the blame for price rises in the energy sector when in face electricity prices have been increasing rapidly for decades; from 1995 to 2012 electricity prices on average have increased 170%, which is four times the increase in the Consumer Price Index. This is despite the continued privatisation of the industry over the past 20 years, a measure that was promised would increase efficiencies and lower consumer prices.

According to the think tank, The Australian Institute (TAI) the deciding factor in price increases since privatisation, has been because of a productivity slump that has occurred in the sector. They report that since 1995 the output per worker measure has increased by 33.6 % for the Australian economy as a whole, yet in the electricity industry output per worker has decreased 24.9%.

One reason the TAI puts forward for this average decline in output per worker is the 217% rise in the number of managers in the electricity sector since 1997. The number of staff to be managed has not mirrored this increase. Making the sector a very hungry, top-heavy beast.

Cartoon: Simon Kneebone (

If one thing is for certain, privatisation of companies tends toward increasing the managerial hog-trough, which ultimately means a lower percentage of workers who are directly engaged in producing electricity and a larger pie that consumers are required to fund.

And this is only one example. Many people across the nation bemoan the rising cost of now-largely privatised public transport. With Melbourne as an example; the system was franchised out to private contractors in 1999. By 2006 The Age reported that the change has cost taxpayers $1.2 billion dollars more than if it had stayed in public hands

With the generous public subsidies the government was required to hand the operators, the system ended up being a negative investment for the state government.

This year the Herald Sun reported that commuting costs for Melbournians had risen at twice the rate of inflation since privatisation; in some cases increasing the annual cost of travel by $1200.

Yet even many bankers advise that they government should not consider privatisation a “quick fix” for the supposed debt crisis. They realise it for the patch-fixing it is, running the risk of undercutting the valuable infrastructure that it is the government’s responsibility to provide.

The Commission of Audit is yet to begin and will probably take years to be handed down. Yet if the new government already has public services in sight, we can expect the next couple of years to be filled with the subtle angling of an already-decided mind.

Quick cash only lasts so long as it takes to spend.  Be careful Tony.

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