Australia’s private sector management is in record disarray

In 50 years of reporting on Australia’s private sector I have never seen significant lumps of it in such disarray as now.

No government of a developed democracy in the western world would stand for what the private sector has done in east coast gas. Picture: Steve Pohlner.

I have been reporting and commenting on large enterprises in the Australian private sector for more than half a century. I have never seen significant lumps of the private sector in such disarray as I am now seeing. And in the case of energy the private sector mess is multiplied many times by appalling government from our two largest states.

As a result of this situation we are requiring a Coalition Federal government to intervene in ways that governments of all persuasions over the last 50 years have never contemplated. And, to its credit, the Turnbull administration has started to do it.

I will return to energy later but sufficient at this stage to say that no government of a developed democracy in the western world would stand for what the private sector has done in east coast gas. ACCC chief Rod Sims is right. There is only one remedy — the stick administered by severe legislative action and severe penalties both corporate and personal.

If it was just gas we could confine the private sector problem. But in banking we find our largest bank has been allegedly taking in drug money and sending some of it to terrorists. We can blame ATMs and computers but there is no excuse that counts. In housing, banks didn’t bother to check loan application forms so lying has become prevalent. In wealth management and insurance we have seen a whole series of scams.

Companies have got around the trade practices act by working in collusion with unions. And so we saw Toll pay the transport union to spy on its competitors (before the Japanese takeover). We see large builders and small contractors pay large sums to unions to protect their patch from competition. The trade practices act never envisaged that companies would use unions as the middle person to get around the act.

And in some ways that extends to enterprise agreements where if you sign your staff up with the union you get an agreement that offers better shift allowances than your non-union competitors.

In superannuation some of the big industry funds are paying sums to unions and industry bodies for suspect services. The government keeps talking about unions getting a slice of superannuation money but it may go a lot further. We don’t know because there is poor disclosure, which is hard to believe given its public money.

The Coalition government is acting in banking and I think it’s going to get the stick out, not just in court imposed fines but in regulations that go way beyond the current ones and extend to executive appointments and salaries. And when the regulators slash bank CEO salaries, that movement will extend around the country. I never have a problem paying CEOs that do well but the poor performers are also scooping the pool.

If the current government runs its full term we will be a very different nation as all of the above situations are tackled. The ALP and the Greens are huge financial beneficiaries from many of the above activities and so will fight change at every corner. But in gas I think they will help the Coalition at least to gain access to Gladstone gas at a price that equates to what gas is being sold to WA consumers. And in power the decision of AGL to abandon coal by 2050 without a detailed plan has caused the whole sector to be examined.

When you look at the gas picture that Rod Sims is painting, you can see why the time for talking has ended. Only actions count.

On the west coast of Australia five suppliers are securing commercial and industrial gas customers at prices of $6gj or lower. On the east coast commercial and industrial gas customers seeking offers are currently usually finding only one supplier, with take-it-or-leave-it offers in the range of $10-16 gigajoule for supply in 2018 — at the peak almost three times that in WA. This exploitation goes right into our industrial base because industrial gas users make up around 46% of domestic gas sales. Among the industries affected are power, manufacture of explosives, glass, paper, steel, fertiliser and chemicals — the heart of the nation.

Sims: “The future of these plants’ investments, and sometimes the future of the plant itself, is at stake. Indeed, the ACCC spoke to well over 20 commercial and industrial gas users and over a third were actually considering either reducing production or closure due to high gas prices. Jobs will often be lost in regions where new jobs will be hard to find.

This problem was created when the “Gladstone Three” exported too much, causing local gas to go north because each of them started a second train. The Santos consortium was the worst. Energy Minister Josh Frydenberg tried to talk with the Gladstone Three but it didn’t work. Some have even cut production, according to Sims. The Australian situation is now so desperate that they should all be treated equally and paid the WA price for the amount of gas that is required for the domestic market. And that gas must be regulated right down the supply train until it reaches commercial and industrial gas customers, including power stations. (It seems some of the pipelines are behaving badly).

The power mess has been created mainly by political vandals in NSW, Victoria and South Australia seeking green votes at the expense of consumers and telling lies about the risk of blackouts and the real cost. But higher gas prices are also part of the power problem.

There needs to be some penalty for the rogue state governments in NSW and Victoria who are stopping the development of their gas, again for green votes. The penalties must be severe but they can start small.

In two years the regulation of the Australian private sector will be totally different. I am appalled that this should be necessary. I don’t think shareholders are going to win but they can blame their boards and chief executives.