The cost-of-living crisis is getting worse. Inflation is up 3.8%, driven by a 37% increase in electricity prices and 11% increase in childcare — all in one year.
The obvious link here that mainstream pundits won’t point out is privatisation — governments selling off publicly-owned assets and services to for-profit corporations.
Rather than unpacking the structural causes of the crisis, most “economists” are simply warning of further interest rate hikes — which will heap more pain on struggling households.
What should be on the agenda is nationalising essential services — bringing them back under public control and out of the hands of profit-hungry corporations. And we should start with electricity and childcare.
The current crisis has been decades in the making, and the massive wave of privatisation commenced by Labor in the 1990s — when the government sold off the Commonwealth Bank, Qantas, CSL and other publicly-owned assets — is a key part of the story.
Publicly-owned essential services, when we had them, maximised quality and affordability. Today, for-profit corporations maximise profit, drive up prices and cut back on quality. To understand its devastating impacts, look no further than electricity and childcare.
Electricity bills feeding profits
Last year, The Australia Institute found that the second largest private electricity retailer in Australia, AGL, was making $755 of profit per customer per year. Origin, Australia’s largest retailer, made $595 in profit per customer. In the same year, Origin’s electricity retail arm recorded a mammoth 172% increase in profit, while AGL recorded a 189% increase in profit. Here’s the kicker. For every $100 of your electricity bill, just $12 is actually the cost of generating electricity.
At every point in the electricity system for-profit corporations are taking a cut. The average profit per customer for electricity transmission and distribution networks (the poles and wires), also largely privatised, is $855 a year.
Meanwhile, private generators regularly game the national electricity market to drive up wholesale prices.
How did this happen? In 1998, the Coalition government created the National Electricity Market — a framework to establish an artificial, private market for electricity. From there, state Labor and Liberal governments began a decades-long process of selling off electricity assets, including the Victorian Liberal’s privatisation of retail, distribution and networks from 1995 to 1998 and Queensland Labor’s privatisation of electricity retail in 2006.
Even those networks and generators that remained in public hands were restructured and forced to act like for-profit corporations under rules introduced by Labor in the 1990s.
From 2009 — when states began fully deregulating electricity prices — to today, electricity prices have increased at nearly three times the rate of inflation. Three times!
Since privatisation, sales staff employed in the electricity sector exploded by 396%, while the number of electricians, labourers and trades people in the electricity sector increased by only 21%. We are literally paying electricity companies to hire sales staff to advertise the exact same product back at us — which we all need anyway. Think about this next time you see advertising from an electricity company.
In this context, government electricity rebates, while better than nothing, function as a band-aid solution, allowing big corporations to carry on making massive profits.
The childcare rort
Childcare was also privatised in the 1990s when the Labor government opened up childcare subsidies to for-profit providers. Prior to privatisation, experts described our childcare system as the envy of international experts. Now it’s the opposite.
Over the last decade alone, 95% of all new childcare centres have been for-profit and, as a result, 75% of the long day care sector is now for-profit. United States corporations and private equity, in particular, see Australian toddlers as a massive profit opportunity. That’s not a sentence that should fill anyone with confidence.
Every year the federal government pays out about $15 billion of childcare subsidies. But, in effect, what the government is doing is not subsidising childcare — it is subsidising, with your tax dollars, a highly exploitative child profit industry.
Let’s break it down.
Looking at three of the largest publicly-traded private childcare corporations, the average profit per child was $6094 last year. With roughly 605,000 children in private childcare, that means that, last year alone, private childcare corporations made roughly $3.8 billion in profit.
In addition, private childcare landlords made $2.7 billion in rent, simply for owning the land in which childcare centres operate, making rent the second biggest cost for childcare operators.
This means that, in total, private corporations make a whopping $6.3 billion in profit from childcare every year, nearly half of the $15 billion in federal investment in childcare. In fact, every time the federal government raises public subsidies, for-profit childcare centres raise their fees and make bigger profits.
[Max Chandler-Maher is a member of the Queensland Greens and was it MP for the seat of Griffiths. This article was first published by DeepCut News and is reprinted with permission.]