The Issue Of Privatisation



WORDS | Rowan Taylor

Mike Baird’s rapid rise to power has left New South Wales with a relatively unknown Premier. However, given Baird’s background in economics, talk of “cost cutting” and “budget balancing” was not wholly unexpected.

His first few weeks in office have seen preliminary moves to sell electricity poles and wires, a proposal to privatise NSW health, and the sale of Newcastle Harbour. These actions have many people worried about exactly how far the State and Federal Governments will go in their quest for a budget surplus. Yet is this fear well founded? Or is privatisation the savvy way to secure Australia’s financial future?

Selling government assets to private parties is tempting, with sales injecting large amounts of cash into government coffers. A recent example is Newcastle’s Port facilities, sold for $1.75 billion. This hefty sum will be used to fund infrastructure in Newcastle, Sydney and rural areas. The potential flow-on effects of this, extend to a revitalisation of rural economies and the expansion of Newcastle as a global trading centre. Mr Baird has said that the decision to sell Newcastle Port will turn the city into ‘The Jewel of The Pacific’.

Similarly, the privatisation of hospitals in NSW could theoretically inject enough cash to upgrade other facilities regularly, cut down on waiting times and provide better pay for healthcare staff. The Premier believes that “such a decision would transform and improve healthcare services completely”.

However, the government’s plans have raised concerns from politicians, journalists and citizens about possible long term repercussions. NSW Health Services Union Secretary, Gerard Hayes cautions that “the private sector doesn’t work out of the goodness of its heart… it does so to make a dollar”. He warned that in the pursuit of profit, privately owned hospitals could cut staff wages and offer an inferior service at an inflated price.

There are also concerns over the permanency of control. Although the government signs away any control of the asset in a sale, the private company buying it has no obligation to keep their purchase. So even though Newcastle Port was sold with a 98 year lease, it may not stay in one pair of hands for the entire time. Peter van Duyn, a maritime industry expert from Melbourne University, noted, “GIP sold their stake in Brisbane Port after three years… the first sale might be to a passive investor… but who knows who the owner might be further down the track?”

Further to this, Mr van Duyn raised concerns over the potential loss of regulatory control. The owners, he said, “have what is basically a monopoly… they can set the Port rates with little or no regulatory oversight from the government or ACCC.”

Whilst these concerns have not been fully realised in NSW, the problems arising from privatisation can be readily seen in the American public health system, largely operated by private companies.

Hospitals in the United States are legally bound to treat patients who have life threatening illnesses or injuries. However, treatment of illness, disability or injury that isn’t immediately life threatening requires health insurance, or a government grant. The former is too expensive for some and the latter can take months, or even years. As a result, the privatised system is tiered, with some hospitals receiving large amounts of money from wealthy patients and others with outdated equipment and insufficient staff due to a lack of funds.

Privatisation is in many cases an excellent way to stimulate the economy and finance infrastructure. However, concerns raised over the State Government’s actions so far are well founded. A lack of transparency over conditions of sales and of concrete long-term contingencies may result in irreversible damage. Only when the concerns have been publically addressed can we be sure about the repercussions for our future.