Benefits of Privatisation: Article by Jennifer Westacott

20 February 2015

This opinion article by Jennifer Westacott, Chief Executive of the Business Council of Australia, was published in The Daily Telegraph on 20 February 2015 under the title ‘Why privatisation is a public good’.

The people of NSW are set to gain substantially from the government’s plans to privatise its energy assets and reinvest the proceeds in new infrastructure.

As we approach the March election, there will be an inevitable debate about whether privatisation is a good thing, but it’s hard to see a viable alternative if we are serious about improving the state and creating jobs.

Privatisation isn’t new. It has been successfully implemented around Australia to the clear benefit of electricity users and the community. ­Privatisation brings two key benefits that ongoing public ownership can’t.

First, it unlocks funding that allows budget-constrained governments to invest in infrastructure. In NSW selling the poles and wires will unlock an estimated $20 billion to spend on projects including a $4.5 billion western Harbour tunnel, $4.1 billion for ­regional transport upgrades, $2 billion extra for schools and hospitals and a $1 billion light rail line in Parramatta.

Without the proceeds of privatisation, investment plans on the scale envisaged by the government could only be undertaken by saddling the community with more debt.

The second benefit is better management of the electricity system. The private sector is better at ­efficiently managing infrastructure assets. You only have to look at Victoria to see the benefits of privatisation — investment in improved energy assets, greater competition and choice for consumers, downward pressure on prices.

Productivity performance in the NSW government-owned network businesses has been dismal and resulted in higher costs. It is no surprise that over the past two decades network prices in NSW have increased by around 122 per cent, compared to a fall of 18 per cent in Victoria.

We should remember that government money is community money. So let’s ask ourselves, would we prefer to have our funds tied up in less efficient assets, or directed towards new infrastructure that works better makes the economy stronger?

Opponents of privatisation should make a constructive contribution to the debate by putting forward a plan for how they would meet infrastructure challenges and improve state ­finances, rather than oppose privatisation outright.

Rather than re-opening debates about the merits of privatisation, it would be better to focus on getting privatisation right, which is why ­appropriate regulation of the privatised asset after the sale to maximise the gains of private ownership is key.

As the Chair of the Australian Competition and Consumer Commission Rod Sims has pointed out, the benefits from privatisation are ­realised when governments put in place adequate regulation to ensure competitive access and pricing. Investors need long-term regulatory certainty as much as consumers do.



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