Electricity privatisation 'a dismal failure': union report

March 7, 2014
Electricity prices are highest in privatised states.

A report commissioned by the Victorian branch of the Electrical Trades Union (ETU) shows that energy sector privatisation in Australia has been "a dismal failure", which has produced "no benefits" for consumers, but has resulted in "large fiscal losses" for taxpayers.

Economist John Quiggin, from the University of Queensland, reviewed energy sector privatisation and the related process of electricity market reform between the early 1990s and now, and found no long-term benefits for either governments or consumers.

The report found electricity prices were highest in privatised states, and had "risen sharply" since the introduction of the National Electricity Market. Quiggin said his review also found customer dissatisfaction has risen "markedly" in privatised states (primarily Victoria and South Australia) and "efficient" investment and operation had not occurred; money was instead diverted to areas such as management and marketing, the February 25 Brisbane Times reported.

Quiggin said that while state-owned enterprises were presented as being a burden on the public purse during privatisation campaigns, they tended to be "consistently profitable" and "in all cases, the option of continued public ownership yielded long-term returns as good as, or better than, the option of selling assets and using the proceeds to repay debt."

He said: "My general conclusion is that privatisation in general hasn't improved the financial situation of state governments, as is one of the primary motives for selling.”

Quiggin said he looked at how governments fared holding on to electricity assets and retaining their earnings, compared to selling assets and using the proceeds to pay down debt. He concluded governments which held onto the assets "did better," the Brisbane Times reported.

He concluded his report by saying: "Privatising the [Queensland electricity] industry in 1996, as recommended at the time [by the Borbidge Liberal-National Party government commission of audit], would have resulted in the loss of dividends, as well as foregoing capital gains. The total loss to the public would have been around $15 billion."

Quiggin said the market system put in place had also "failed badly" to cope with the arrival of renewable energy options, despite looming climate change. "The market has failed to cope properly with renewable [energy] so we have seen a continuation of failure of policy there to make proper use of renewables and integrate them properly into the system."

The ETU-sponsored report directly contradicts a push by the federal and various state Coalition governments to escalate the neo-liberal drive to privatise public assets, and place them in the hands of corporate business giants. It also refutes the disastrous decisions by past Labor governments, including the Bligh Labor government in Queensland in recent years, to sell off government enterprises to big business in a fruitless quest to balance the government budget.

One of the first acts by Prime Minister Tony Abbott was to create a commission of audit. This will be used to launch a big attack on the public sector and the trade union movement. The May federal budget is shaping up to be the most vicious, pro-business and anti-worker budget in decades.

A key part of this pro-business offensive is a plan for wholesale sell-offs of remaining public assets. This offensive was clearly signalled by federal Treasurer Joe Hockey in a speech to the Lowy Institute on February 6.

Hockey spoke of a new era of privatisation, and called on big business to "ready their cheque books" and prepare to "shoulder the burden" by buying public assets. "The private sector is cashed up around the world. Governments are not. We need to facilitate that private sector investment," Hockey said.

According to a comment piece in the February 15 SMH, there are "government-owned assets worth $130 billion waiting to be privatised". Hockey did not list the targets for sell-off, but business representatives have indicated most are currently owned by state governments.

"One drawn up by ANZ's economics department, for example, includes the ports of Melbourne ($5 billion), Newcastle ($1 billion) and Gladstone ($3.1 billion), electricity distribution and transmission companies in NSW and Queensland that ANZ thinks are worth almost $69 billion, and water distribution companies in NSW, Victoria, Queensland, Western Australia and South Australia that ANZ says could fetch about $41 billion," the SMH said.

The first target for the federal government is likely to be Medibank Private. A corporate public relations firm has already been contracted by the Abbott government, at a cost to the taxpayers of $211,000, to draw up plans for the privatisation of the publicly owned health insurance company.

The privatisation is expected to yield more than $4 billion. However, Medibank Private returned a profit to the federal government of $315 million last year. In the long term, the sell-off will represent a serious loss to the public purse.

The Australian Medical Association (AMA) warned that the sale of Medibank Private could result in higher health insurance premiums. The AMA said premiums could rise if Medibank is "gobbled up" by a rival firm in a trade sale.

Another target is Australia Post. Hockey did not rule out its privatisation when asked by the media on February 12. "I'm not going to offer a sale list today,” he said.

The Queensland branch of the ETU has been running a strong campaign against the further sell-off of state power industry assets, promoted by the website not4sale.org.au.

ETU state secretary Peter Simpson said the Quiggin report's findings were “pretty much what we have been saying for some time. Our publicly owned power entities are profitable and efficient when managed properly and the dividends generated by them can and should be used to reduce the cost of power for Queensland households.”

The Socialist Alliance has been campaigning over the past year on the theme, "Take back the wealth: Nationalise the mines, banks and energy companies under workers' and community control". The defence of publicly owned assets is a crucial part of the struggle to combat the neoliberal offensive now escalating in Australia and around the world.

While state ownership under capitalism is by itself a limited gain for working people, it represents a step away from the total domination by the “free market” over all wealth in our society. Any part of the economy that is government owned makes profits for the public purse.

This profit can be used for the public good, including health, education, social welfare and the environment. Only political struggle by the majority of people can ensure that government funds are in fact used for the public good, and not for corporate welfare, military missions and ecologically unsustainable infrastructure.

That's why we need to campaign for public ownership under workers' and community control. In the end, only a genuine people's government will guarantee this goal is fully implemented.

In the meantime, the unions and people's movement must fight to defend public ownership of government assets against the voracious attacks of the super-rich, seeking to steal what little public sector we have left after several decades of neo-liberal pillage. The struggle to make public enterprise not for sale is a vital priority in this period.

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