The head of the competition regulator has called out governments for blatantly structuring asset sales to maximise profits at the expense of consumers and businesses.Australian Competition and Consumer Commission chairman Rod Sims said he had been a strong advocate of privatisation for 30 years because he believed it enhanced economic efficiency but he now believed “people in the street” who oppose privatisation because it raises prices had it right based on recent port sales in NSW.
He said he was now “almost at the point of opposing privatisation” because state and federal governments were becoming increasingly blatant about structuring sales to maximise proceeds at the expense of competition.
“I am getting more exasperated. I just think governments are more explicitly now privatising to maximise the proceeds – including the Commonwealth,” he said.
Rod Sims says the NSW government privatised Port Botany (pictured) and Port Kembla together to limit competittion
Rod Sims says the NSW government privatised Port Botany (pictured) and Port Kembla together to limit competittion Kirk Gilmour
“They are explicitly saying the reason they don’t want to do this or this is that it’ll damage the proceeds they are getting. They’re not even playing the rhetorical game any more.
‘A sharp upper cut is needed’
“I see it getting worse. I think a sharp upper cut is needed in this area. That’s why I am saying, ‘let’s just stop the privatisations’. It is increasing prices – let’s just call it out.”
Privatisation of public assets has been a pillar of Australian public policy since the Keating government privatised Commonwealth Bank, CSL and Qantas in the early 1990s and the Kennett government repaired Victoria’s shredded balance sheet in the 1990s by selling electricity and gas companies.
But the policy has often struggled to win the support of the public, and steep power price rises in recent years have set it back even further even though they have occurred just as much under public ownership.
Mr Sims told the Melbourne Economic Forum on Tuesday that privatisations that just sought to maximise sale proceeds were examples of the types of poor policy implementation that had sparked a populist backlash against reform.
“I believe it’s severely damaging our economy,” he said. The forum is jointly hosted by Victoria and Melbourne universities in partnership with The Australian Financial Review.
Ports the worst
Mr Sims said ports privatisation was the best example of the approach that had turned him off privatisation as a policy.
The ports of Botany and Kembla had been privatised together to limit competition, a big debate was under way in Victoria about making sure the Port of Hastings would be a competitor to a privatised Port of Melbourne in future, and “the same battle” was being waged over the Port of Fremantle, where the WA government wants to give the buyer a right of first refusal over a future outer harbour port.
The ACCC chairman last month criticised the way Port Botany was privatised, saying price monitoring of unregulated monopolies was ineffective. But this is the first time he has gone so far as the call a halt to sales of public assets.
Mr Sims said he was less concerned about the NSW government’s power poles and wires privatisations because the state has an independent pricing regulator. The NSW government has applied to the Australian Energy Markets Commission to draw out until 2024 an annual price hike of up to $520 per household that was scheduled take effect from July 2017 to avoid a “price shock” for consumers.
Mr Sims said he was also concerned that monopoly ports were being privatised without any pricing regulation, leading to “lovely headlines in the Financial Review saying ‘gosh what successful sales, look at the multiples they achieved’.”
“Of course they bloody well did. The owners have factored in very large price rises because there’s no regulation of how they set the prices of a monopoly. How dopey is that?” he said.
‘It’s damaging our cost structure’
“I think it’s a serious issue facing Australia. I think it’s damaging our cost structure considerably.
“And when you meet people in the street and they say, ‘I don’t like privatisation because it boosts the prices’, and you dismiss them, no no, they’re right. Recent examples suggest they’re right.”
Other examples of botched reforms included vocational education and training loans with “billions of dollars wasted”, deregulation of power poles and wires leading to power prices “almost automatically” doubling in Queensland and NSW. Also reforms over investment in poles and wires, and greenhouse policies that picked winners via an ever increasing renewable energy target – “sole reliance on (which) causes problems “.
Road pricing reform was also being proposed in a way that made people think they were facing a new tax, not just a switch from fuel-based road user charges to direct charges.
Allan Fels, ACCC chairman from 1995 to 2003, said his own experience was similar.
“Everyone was only interested in revenue,” Professor fels said. He said Sydney Airport Corporation was privatised with first rights to bid for a second airport in Sydney, and “even the famed” Kennett-Stockdale” government in Victoria in the 1990s put “unbelievable pressure” on the ACCC to allow long periods of very high monopoly prices to maximise the proceeds.