OPINION: Privatisation push contradicts rhetoric

WHEN it comes to contradicting visions, look no further than federal Treasurer Joe Hockey.

Within the course of a week, the man pulling the nation's purse strings moved from promoting the cause of privatisation and foreign investment - with a policy to encourage state government sales of ports, electricity networks and other public assets - to blocking an American purchase of GrainCorp, arguing it was not in the national interest.

It seems the inherent contradictions were lost on the Treasurer, with political expediency and public pressure drivers of his decision-making rather than informed, fact-based analysis.

At the same time, our privatised national aviation carrier, Qantas, has not only called for urgent political assistance as it struggles to compete with state-owned overseas airlines, it has announced the axing of 1000 jobs.

Neither Prime Minister Tony Abbott, who indicated a willingness to examine measures such as the government buying back a stake to ensure Qantas remained an "Australian icon", nor Mr Hockey, who said such action could come at a cost to taxpayers, seemed in the slightest bit phased by this latest example of the failures of past Australian privatisations.

Instead, Mr Hockey will push ahead with his plan at the Council of Australian Governments meeting later this month. His pitch - primarily aimed at NSW and Queensland where the public power networks and some generators have been retained - is that if the community wants investment in productivity-raising infrastructure projects, it must accept the offloading of profit-making public assets to fund it.

While much has been made of the carrot - federal government tax incentives that will offset part of the lost income by redirecting corporate tax to the states - this money will cover barely a quarter of the lost income.

Data from the NSW Auditor-General reveals that total government revenue from the electricity network from dividends, tax equivalents and interest totalled $2.5 billion last financial year. Under Mr Hockey's plan that state would get just $700 million, a net loss of almost $2 billion a year.

Far from being a burden on the public, electricity network businesses have been consistently profitable, providing a substantial ongoing windfall to states such as NSW that have retained ownership of them. While there have been some fluctuations, the relative profitability of energy generator and network businesses has increased steadily across the country.

Over the long term, the returns delivered by continued public ownership are as good as, or better than, the option of selling assets.

In South Australia, where the government announced in 1999 the long-term lease of its distribution company, ETSA Utilities, and the sale of retail company ETSA Power for a total of $3.55 billion, taxpayers have been severely shortchanged.

By 2012, earnings before interest and taxes for ETSA Utilities - now called SA Power Networks - had almost doubled from $350 million in 2000 to $642 million. Even adjusting for inflation, this shows earnings had risen at a real rate of 2-3 per cent a year, with the privatisation of ETSA costing the South Australian public between $1 billion and $2 billion.

Research by economics professor John Quiggin, of the University of Queensland, into the Victorian experience of electricity privatisation showed similar results. His projected earnings of the State Electricity Commission of Victoria under continued public ownership, based on its published business plan for the first 10 years and constant earnings thereafter, estimated the discounted value of earnings was between $20 billion and $30 billion, compared with a sale price of $20 billion.

While the economic arguments against privatisation are strong, so too is the importance of accountability to the public that only public ownership provides.

Energy is not only an essential service, it is a natural monopoly. There is only one set of poles and wires bringing power to homes and workplaces. If this service becomes unreliable, or maintenance standards are cut, there is no alternative for the consumer.

It is only under public ownership, via the electoral process, that there is accountability to the public and a real mechanism to drive change.

The Treasurer's arguments for blocking the sale of GrainCorp to Archer Daniels Midland led to an almost identical position that the loss of control of our monopoly electricity transmission and distribution businesses to multinational corporations would not be in the national interest.

Allen Hicks is national secretary of the Electrical Trades Union.

DOUBLE VISION: Treasurer Joe Hockey and Prime Minister Tony Abbott.

DOUBLE VISION: Treasurer Joe Hockey and Prime Minister Tony Abbott.


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