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The Forum > Article Comments > Australia: the consequences of privatised infrastructure > Comments

Australia: the consequences of privatised infrastructure : Comments

By Tristan Ewins, published 7/8/2012

Capitalism has an interest in opposing public private partnerships in Australia as they threaten its reputation.

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Tristan,

I agree that flat fees hit-low income households. The solution is to increase incomes so they can afford to pay for necessities, but charge them cost-reflective prices. This is why carbon tax revenues are being used to raise benefits and cut taxes.

Again, there’s a question of opportunity cost. Is the low-income earner better off with a high-quality public education and toll road, or mediocre “free” service in both. Given the disproportionate use of social infrastructure services (education, health etc.) by low income earners, it’s arguable that they are better off with government concentrating its spending efforts there.

Some WA examples of poor public utilities:

• The last organisations I know to accept payment of bills by phone were the water corporation and power companies – both government owned.

• Australia Post is the only business that is not open at my local shopping centre on Saturday.

• Massive improvements in services and productivity were achieved in the State’s rail freight sector when it was corporatized in the early 1990s. Employment was “slashed”, to use your term, but the industry needed it.

• The government subsidises and regulates public bus services, but private operators bid for the tender to supply the services. In my opinion, the service has improved since this was outsourced.

In some ways, WA is a counterfactual to your arguments because it has not privatised many utilities. Yet we have similar challenges to other states – rising energy and water costs, congestion on roads and overcrowding on public transport, unmet demand for public housing, a growing proportion of the budget eaten up by the health service …. This suggests to me that ownership is not the core issue.

Actually, I think competition and contestability are more significant than ownership in shaping a utility’s performance. For that reason, I share some of your concern about privatising monopolies, unless they can be regulated effectively. Telstra’s real prices to customers started to fall when it was exposed to competition (and noticeably at the time, only in those services where it faced competition).
Posted by Rhian, Tuesday, 7 August 2012 7:53:07 PM
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the consequences of privatised infrastructure
Well, we've just experienced the consequences of Government infrastructure & it looks as though neither of them are a very good model.
What's missing for both to work is a set of guidelines which can not be constantly altered or challenged by those whose greed makes them believe they deserve more. That's where flat tax would help. No if's no but's. The other thing that would help substantially is a term of National Service. People need to enter the workforce with a mindset that includes responsibility not just entitlements. Far too much money is being made by many with absolutely no value for the money which is then locked up & does not contribute anything to the economy. Ah yes, the "experts" who got us nowhere thus far will differ. They differ only for one reason & that is themselves. Yes, economy is a delicately balanced act but it is made artificially complex merely to confuse & deceive those who have the interest of the nation in mind.
Posted by individual, Wednesday, 8 August 2012 7:46:50 AM
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When the Sydney cross-city tunnel opened in 2007 many objected to the relatively high toll (now over $4) for a short trip, and the company that built it went bust having gone down the usual NSW route of underestimating costs, overestimating traffic flow and paying the required sweetner of tens of millions of dollars to the state government (what we'd call a bribe, but of course it wasn't - I wish I could remember the term they used for it). When the debate was raging about PPPs and the cross city tunnel, an infrastructure guru popped his head over the parapet and suggested that if the tunnel had been built and run by private enterprise with government/our money on a design-construct-mantain-and-operate basis it could have been paid off in 30 years with a fixed one dollar toll. At current toll levels, it obviously could have been paid off much more quickly and the toll income could have been allocated to fund further infrastructure projects. This seemed such a sensible idea that of course it sank without a trace.

Meanwhile in Canberra the good burghers were exhorted to curtail their water use dramatically during the drought and not only did so but the habit persisted when the drought broke. The privatised water company was displeased at this threat to their bottom line and promptly upped the price of water. Which is why private enterprise should not be allowed to own resources which we should be using less of.
Posted by Candide, Wednesday, 8 August 2012 7:53:07 AM
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I agree Tristan that public ownership and operation wins hands down when it comes to the operation of public infrastructure, as a general rule.

But the most critical point of all doesn’t even rate a mention in your article: the constantly and rapidly increasing pressure on much of our current infrastructure and demand for new stuff!

This is of much bigger concern than the differences between private and public operations.

Wouldn’t it be nice if our tax-payer dollars could be directed much more into real improvements in infrastructure for the established population rather than into duplication of the same infrastructure for ever-more people and into struggling to fix infrastructure that is overstressed and hence poorly functional, and becoming worse all the time!

It’s a no-brainer!

If we really want good quality infrastructure and efficient management thereof, we need to eliminate or at least greatly reduce the constantly increasing pressure on and demand for ever-more of it!

The differences between public and private operation pale into insignificance compared to this factor!
Posted by Ludwig, Wednesday, 8 August 2012 9:12:15 AM
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Another point not mentioned is that public infrastructure provided by the private sector ultimately costs six to seven times that of government infrastructure. Of course, government has no chance of providing public infrastructure given the ridiculously high immigration rate.

Governments need to stop ignoring the reality that public infrastructure has a substantial value. While it is ignored, high immigration will result in increasing public debt and decaying public infrastructure.
Posted by Fester, Wednesday, 8 August 2012 5:48:21 PM
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