Why we privatise public assets: to build schools, hospitals and rail (Sydney Morning Herald, 13 December 2018)

NSW: Looking to our economic future – Business Council of Australia speech
December 5, 2018

Why we privatise public assets: to build schools, hospitals and rail (Sydney Morning Herald, 13 December 2018)

Sydney Morning Herald

Independent watchdogs safeguard the public interest. They do important work, and like any good government, we respect and listen to what they have to say.

This week the NSW Auditor-General expressed concerns about the privatisation of Ausgrid and the ACCC commenced legal action regarding the privatisation of NSW Ports – both by long-term lease. These are important matters for our government because privatisation – or asset recycling – has been critical to getting our state moving again.

Under this policy, assets we don’t need to own such as ports or electricity networks are leased out and the proceeds used to invest in assets our community wants – like schools, hospitals, road and rail.

The ACCC action will go before the courts in due course, so there’s little to say except the government respectfully maintains its view no competition issues arise from the arrangement.

Ausgrid is a bit different. An independent audit identified procedural weaknesses, some of which we disagree with, but which we will nonetheless carefully review. It grabbed headlines, but don’t let hype overwhelm the facts.

What the report actually said is there were “some shortcomings” in the process; not that the Ausgrid transaction was a bad deal. Rather, it found “the process to obtain assurance that the final price represented value for money was adequate”.

Attempts to draw broader conclusions – such as Herald columnist Ross Gittins’ insinuation that the Ausgrid transaction is linked with higher power prices – are fanciful.

The Auditor-General said nothing of the sort. But credible sources have considered how our “poles and wires” privatisations have affected power prices.  ACCC chair Rod Simms is on the record saying “there is no doubt that privatisation has worked with poles and wires”.

The Independent Pricing and Regulatory Tribunal, Electricity Price Commissioner Professor Allan Fels, and Castalia Strategic Advisors have all confirmed the poles and wires transactions are on track to deliver lower network charges for consumers.

Network charges make up around 40 per cent of a household electricity bill, and because of our reforms, that part of the average bill has decreased. Unfortunately, those savings have been offset by increases in wholesale energy prices, which have nothing to do with poles-and-wires transactions like Ausgrid. The bottom line: without our reforms, your bills would be even higher.

Critics say privatisations like Ausgrid are just a money grab. But where does that money go? I’ll tell you: the schools our kids need, the hospitals we all rely on, new rail networks such as Metro NorthWest, which previous governments promised three times, over more than a decade, but never built. Thanks to asset recycling, we will open that metro line next year.

There has been another major benefit, too. Our government’s public investment grew the economy by half a percentage point last year – five times its average contribution.

It’s a massive but silent boost, helping to fuel a construction boom and create tens of thousands of jobs. Without asset recycling, there would be no equivalent public investment, and the NSW economy would be much weaker. There would be fewer jobs, and working families would be hurting more.

So don’t be fooled by ideologues who fantasise that asset recycling is nothing more than a devious plot to take money from taxpayers. In reality, it’s the only viable way to build what NSW needs, especially as our state is growing.

Our government is not wedded to privatisations. Just last week, the state’s specialist stonemasons unit was featured in the Herald, preserved and kept strong in government hands, because there are some things only governments can and should do.

When it comes to the electricity network transactions, the question today is the same as it was in 2015: would you rather own the poles and wires on your street, or a new school and hospital around the corner?

Our government has chosen to get things done. As the projects we are building begin to steadily open, I believe we will all begin to see it was worth the effort.

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