By Roger Raven
PERTH — Following the WA Liberal/National Party accession to power, Premier Richard Court announced that one Les McCarrey would conduct an "Independent Commission to Review Public Sector Finances". He was "assisted" by three prominent business people.
In his extensive use of consultants, McCarrey imitated former Labor premier Brian Burke's dislike and distrust of the public service. He was most receptive to the views of the WA Chamber of Commerce and Industry(CCI).
One source commented that the report was even more hastily and incompetently prepared than was usually the case for such emissions and that most of the contents had been written even before the report had been sought.
Transperth
The proposal to corporatise and to some extent flog off Transperth's operations is a natural extension of Labor policy. To let private operators have the profitable routes while taxpayers subsidise unprofitable state-run sections is a familiar story.
A resident of East Fremantle pointed out that in travelling between Beacon Hill and central Sydney, he and two others had to transfer between two buses, a train and a ferry. In Perth the exercise would have cost $5; in Sydney it cost $25.
Transperth operates all rail and most bus services between Mandurah in the south and Yanchep in the north, with no further charge for subsequent trips within two hours of buying the original ticket, and complete transferability between bus, train and ferry. An all-day unlimited-distance ticket for a full-time student costs about $1.41.
Transperth has an operating loss, but this does not consider the savings in road construction, car parking and public hospital costs from public transport. From the social point of view, Transperth is quite profitable, but we wouldn't expect the Institute of Public Affairs to agree.
As we have seen with the express bus services and the domestic airline industry, big organisations may collapse without warning. Passengers and towns lacking government transport services may then have big problems. Again we have the conflict between the private interest and public good.
Regional development
The main problem with off-loading regional development programs onto local authorities is that country regions in particular can seldom attract sufficient private capital to significantly diversify the local economy. The only way that most country centres will get sufficient investment is through manufacturing or other ventures operated by government business enterprises.
Industry, trade and regional development tend to be left to the private sector, since big business is very hostile to government attempts to reduce the damage done by private sector greed and contempt for social values. The Mabo business is an excellent example of the government being told to trample on the Aborigines so that business can freeload.
Unemployment has been a problem for 15 years, not the two or three often implied by the media. The gross waste of the billions transferred from workers to business by the Accord since 1983 supports the view that the private sector won't resolve unemployment by itself.
Any country (or state) can follow at least two types of industrial development policies: one based on comparative advantage, and another based on competitive advantage/strategic trade. The former seems to be working very badly; the latter requires extensive government intervention.
Accordingly, the government should be seeking to pick winners. Picking winners is not impossibly difficult, but it does need courage and patience; fortunately, it is relatively easy to recognise losers.
The biggest problem is political. The second biggest problem is managerial, in that most of the people with the experience to handle such complex affairs are committed supporters of the ideology of the ruling class.
In this context the R&I Bank should be using some of its $10 billion in assets to lend for new manufacturing ventures rather than for somewhat sterile investments in housing and term loans.
SECWA
It is common practice for reactionaries to justify flog-offs by comparing the actual performance of a semi-government authority with the completely unrealistic ideal that is advertised as being the norm for the private sector.
McCarrey completely disregarded the fact that the State Electricity Commission's capital base of $4253 million is almost entirely (95%) borrowings — its high and recurring interest bill ($455 million in 1991-2) is an inevitable consequence. Its tariffs are accordingly considerably higher than they need be.
This is an inexcusable and presumably deliberate omission by McCarrey. SECWA's "high" costs arose because it has been deliberately starved of capital under successive Labor and Liberal governments.
Most power generation organisations are vertically integrated. The Carnegie and McCarrey reports both have proposals for restructuring SECWA that involve its dismemberment, with a clumsy and complex system of contracts between unrelated corporate bodies being required to try to achieve the same efficiency.
Consider financial deregulation. In the early '80s, cross subsidies of country branches and households that dealt with the Commonwealth Savings Bank came to $60-80 million a year; returns to lenders were reduced accordingly. Up until September 1992, deregulation had cost borrowers, bank shareholders, bank employees and governments some $30,000 million.
Subsidies to SECWA consumers are said to mean higher charges (said to total $59 million) to other users, notably business. The experience of financial deregulation is that dismemberment will be a lot more costly than that.
Power charges can be substantially lowered without the disaster that would be created by the Carnegie/McCarrey approach, simply by converting SECWA debt to government equity.
Homeswest
McCarrey relied on "a committee of business people with long experience in the land subdivision and housing industry". He evidently saw no need for the committee to include members of the Council of Social Services, or tenants.
Homeswest's (formerly the State Housing Commission) performance on housing loans appears to be a lot better than that of the private sector banks in their corporate lending.
The high turnover McCarrey claims for Homeswest tenants seems in conflict with the statement that 20% is turned over a year. This implies an average stay of five years, which seems pretty good to me. Rent should be based on capacity to pay, not market values. Affluent people will survive having poorer people next door.
"Securitisation" of "Keystart" concessional housing loans is another of McCarrey's silly suggestions. It involves the lender reselling the loan to a third party — the home owner may be completely unaware that someone else now owns the mortgage, until he/she defaults or starts to wonder why it's so expensive. Even the Reserve Bank is wary; there is a great risk that the original lender (Homeswest) would be saddled with any problems, even if some private business was legally liable.
Rabid right
However, the Court government is too moderate for the rabid right. The Institute of Public Affairs was later able to publish a three-quarter-page article in the West Australian in which it denounced the failure of Court to implement the New Right financial agenda in its August budget.
The minister for energy resources subsequently announced that at least 500 of the 5000 jobs within SECWA would be demolished as part of the split of SECWA into independent gas and electricity operations. Extreme though it is, even more was demanded by the IPA and CCI.
A good deal of the political strength of the economic irrationalists derives from the presence of rabid right organisations in each state. We on the left need to put real effort into developing economic policy working groups that counter the claims of the rabid right.