Private networks, cheaper bills

MIKE Baird has a good chance to sell voters a simple truth.

QUEENSLAND’S newly sworn-in Premier, Annastacia Palaszczuk, told a meeting with business representatives yesterday that the challenge facing the state was “about job creation, kick-starting our economy, restoring our confidence and restoring our trust”. A good start would be explaining how her minority government will pay down debt and fund infrastructure and services, having locked itself into public ownership of assets better run by the private sector.

The Liberal National Party government under Campbell Newman had a plan to lease electricity networks and ports to retire $25 billion-plus in debt and to underwrite infrastructure. Labor’s answer was a merger of state-owned power companies with diverted revenues cutting debt by a mere $12bn across 10 years. Quite apart from any double-counting of revenue, the track record of utility reform suggests that such an anti-competitive merger would only increase the upward pressure on electricity prices that comes with state ownership.

A remarkable feature of the Queensland election campaign was the failure to get a simple message through to voters: your power bill will go down if the government lets private enterprise run electricity networks. It’s a statement of fact that the labour movement, and its parliamentary wing, is hoping to obscure in the lead-up to the NSW election in March. Liberal Premier Mike Baird is pitching a 49 per cent privatisation of urban poles and wires so he has the money to remedy congestion with infrastructure, including a second railway crossing for the Sydney Harbour Bridge. He may have better luck in selling the hip-pocket bonus — lower power bills — than Mr Newman, who did a good policy a disservice by not explaining fully and clearly its many benefits.

Electricity network charges in Queensland and NSW — where government owns the poles and wires — rose by 140 per cent and 122 per cent, respectively, between 1996-97 and 2012-13, according to an Ernst & Young study. In Victoria and South Australia, where the Kennett and Olsen governments pushed through privatisation, those charges fell by 18 per cent (1996 to 2013) and 17pc (1998-99 to 2010-11). Operating costs under public ownership are higher because managers feel less pressure to tackle trade union featherbedding.

And as Tom Parry, foundation chairman of the NSW Independent Pricing and Regulatory Tribunal, explained in this newspaper on Monday, public ownership brings perverse incentives for excessive capital spending; hence the “gold-plating” of networks. Much of this has been obvious for years yet politicians on both sides of the divide have wobbled or come unstuck on privatisation: Labor’s Bob Carr and the Liberals’ Barry O’Farrell in NSW; Labor’s Anna Bligh and Mr Newman in Queensland.

The path to success is to mobilise the scattered beneficiaries of reform: consumers. The “stop the sell-off” campaign run by the Electrical Trades Union is unwittingly helpful. It describes the poles and wires as “the state’s most profitable assets” — a tacit admission of uncompetitive pricing. And, acknowledging the case for better infrastructure, the ETU’s ideas for coming up with the money — a tax on jobs and more debt — would impose costs on the general public to protect economic privileges for its members.