EDITORIAL: A warning against asset sales – Newcastle Herald

June 23, 2014, 10:30 p.m.

 

WARNING: Rod Sims – “Privatising in ways that limit competition in order to maximise the sale proceeds is the wrong way”.

 

THE conflict of interest involved in governments pushing privatisation agendas is seldom discussed.

Governments want the highest price they can get when they sell public assets, and it seems that can make them forget their duty to act in the best interests of citizens.

As the chairman of the Australian Competition and Consumer Commission, Rod Sims, has warned: ‘‘Privatising in ways that limit competition in order to maximise the sale proceeds is the wrong way’’.

In other words, creating a climate where the buyer of a public asset is willing to pay a higher price because it knows it will be allowed to gouge the public in perpetuity is a bad practice.

Mr Sims has raised the issue now because governments at every level in Australia appear anxious to take advantage of the near clean-sweep of conservative rule to sell assets while they have a clear opportunity. State and federal governments are planning about $57billion in asset sales in coming years.

Partly the motivation appears ideological, in that some believe private operators of businesses are always more efficient than public ones. But another reason for the rush to sell may be simply the desire to grab a big pile of cash before the other side of politics gets a chance to do the same.

The ACCC has tried to slow the process down. In NSW it has sidelined premier Mike Baird’s eager bid to sell Hunter-based Macquarie Generation to AGL, warning that this sale – if permitted – will reduce competition in the power industry. Reduced competition almost always means consumers pay more than they need to, as monopolists, oligopolies and cartels take as much margin as their market muscle allows.

Mr Sims has also expressed concern about the sale of a number of ports, including the Port of Newcastle, saying that these sales have not included price control conditions.

The ACCC chairman is writing to state and national governments, pointing out that maximising asset sale prices by helping the buyers into a monopoly or near-monopoly position is ‘‘effectively a tax on future generations’’.

Mr Sims has also scoffed at government claims that creating private monopolies and handing them lucrative markets of captive customers will produce corporate ‘‘national champions’’.

‘‘Firms involved in cosy duopolies or oligopolies here in Australia are unlikely to succeed on the world stage,’’ he has warned. That’s not because they’ll lack profits: they’ll have plenty of those. What they will lack is any need or incentive to innovate or to pursue efficiency.

The danger is they will become bloated and lazy, offsetting any benefit from privatisation with a much bigger drag on the economy.