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Thursday, 19 June 2014
Page: 6674


Mr BANDT (Melbourne) (10:31): On any objective analysis, public assets that have been built up using public funds and public toil will deliver a better return for the public if they remain in public hands. There is a very strong principled and political argument to say that, when you have electricity networks, public transport networks and road networks that have been built up for the common benefit over generations by the public, it should be the public that holds onto them and gets the benefit of them.

But, more importantly, any sensible economic analysis also shows that the public and consumers benefit from public assets remaining in public hands. There is a very simple reason for that. If you sell something off to the private sector, they will want to make a profit out of it. When they make a profit out of it, the costs get passed on to the public and the consumer, in the form of higher prices.

That has been the record in Victoria—for example, with the electricity network. What has been made crystal clear in Victoria is that from the 1950s until the mid 1990s, following integration and public ownership, real electricity prices across the country actually fell. But then in Victoria, after privatisation and after the reforms to the National Electricity Market, prices increased sharply and the reliability of the network went down.

There are a number of reasons for that, and I will come to that a bit later in my speech. But the point is this: if economically there is no argument for rushing to sell off public assets, then you have to wonder what the motivation behind this bill is. What this bill effectively does is create a slush fund for the next two years to bribe state governments to sell off public assets as quickly as possible. This comes in the context, of course, of the federal government axing funds to state governments. So $80 billion comes out of health and education and we rip up agreements around health and the like. State governments find themselves increasingly cash strapped. The government does not deliver on Gonski funds for schools. Then it turns around and says, 'I'll tell you what, sunshine—if you sell your assets in the next two years, we'll give you a cash payment.' That is effectively the federal government bribing state governments to sell things off as quickly as possible.

Unfortunately, in Victoria, as I think is the case in New South Wales, we have state premiers and treasurers who are effectively the flying monkeys of this Prime Minister, who are prepared to go out and push the privatisation and toll roads agenda as quickly as possible. They are lining up for this fund to be established, because what the Liberal governments at the state level and at the federal level know is that the losers out of this will be the consumers, who will pay higher prices, but the winners will be the Liberal Party backers. You only have to look at who this Prime Minister appointed to his Commission of Audit and the large companies that they run to see who will benefit when public assets are sold off.

What we know, and what we have seen in Victoria over many years, is that when public assets are sold off they get sold off to the private sector, but the public—the taxpayer—bears the risk if the sale or the operation does not work out quite as planned. So you privatise the profits but you keep the losses in public hands. That is what we found in Victoria and that is what you find right across the country.

This bill makes no economic sense. The public is going to end up paying three times. Firstly, the public will lose an asset that in many cases generates returns for the community. So you lose the asset, and you only get to sell things off once. The idea that you balance the budget by selling off the farm is economic lunacy, because once you have sold it you do not get it back. You will get a short-term sugar hit, but after that you lose the recurrent income and you lose the asset forever. I do not know of many households who would decide that the best way to balance their weekly budget is to sell the home, but that is what this government is encouraging state governments to do.

You will lose the first time because you will lose the asset. The taxpayer will pay the second time because they will have to pay billions of dollars—money that will just go out the door to state governments. So you are paying to subsidise the state governments unnecessarily as well. You are going to lose the third time because, just as we found with electricity and just as we found with transport, it becomes more expensive. It is a massive cost-shifting exercise to make the public pay more so that the private sector gets higher profits and everyone loses out, except for big business and the financial funds that are bankrolling them.

Mr KATTER: You're dead right.

Mr BANDT: A report that everyone ought to read, titled Electricity privatisation in Australia: a record of failure, makes crystal clear why this is the case. Once you sell off something, you hand it over to someone who wants to make a profit—and that is fair enough; that is how the private sector works—but the consequence of it is that they will make the profit out of the public. That is the first point. What the private sector then do once they have got it—and we found this, and any objective analysis demonstrates it—is that, because they do not have an interest in investing in capital and maintaining it, they do what every company would do, which is to squeeze the maximum possible profit out of its asset. This means the network gets run down, which is why in Victoria we saw a massive spike in complaints from customers about quality and reliability. We also find that the rate of return from these companies is at Australia-wide highs. The result with the electricity network has been that the owners have made post-tax real rates of return at close to 10 per cent annually since 2006. So the profit is significant and, again, it comes on the back of the consumers.

The last thing—and this is significant—is the reason prices go up when you privatise roads and you have to pay a toll every time you go on them or when you privatise your electricity network. It costs a heck of a lot more for the private sector to borrow money to fund its operations than it does for the public sector. What this report found in the case of the electricity network—and I think the figures would broadly apply to transport as well—is that we have had a cost in privatised assets of almost 10 per cent per annum interest on the corporate owner's debt on electricity assets, which compares to government borrowings of closer to three per cent. What does this mean? It means something very simple. If you wanted to build an electricity network or a public transport network at the cheapest cost, you would say that the government should borrow to fund that investment. It would not add to net debt, because you have an asset there to back it up. Most people would say, 'Yes, let's borrow to fund something as long as we are funding a useful asset that is ours.' So you have a choice: should the government borrow at three per cent to fund the asset, or should we get the private sector to borrow at 10 per cent? When this Liberal government says, 'The answer is to hand it over to the private sector,' it is no wonder that electricity bills go up. It is no wonder that the cost of getting on the roads goes up. This is because it costs the private sector more to borrow. If we could get over this obsession with debt and say, 'If you have manageable debt set off against an asset that is there for the public good, it is a sensible thing to do,' the country would be much better off. Most households know this, because people understand that, yes, they are in debt, but it is called a 'mortgage'. They are paying off the cost of their house because they will have an asset there at the end of it. As long as it is manageable, it is okay. As long as there is something there at the end of it, it is okay. The government should adopt a similar approach.

But here we have a slush fund to create a privatised toll road—supposed nirvana—across Australia. It is going to come at the expense of public transport when we need to be investing in public transport, and it is going to come off the back of the public paying more and potentially going into more debt. This government is not getting rid of debt; it is just shifting it across to the public. It is shifting it across to the students in the form of student debt. You will now find with the higher prices here that the public is going to end up paying more. We clearly have an agenda from this government for a privatised toll road network across Australia and also an agenda to support its private backers, and it is all going to come at the expense of the public. This is why we will oppose the bill, and I will move an amendment to it shortly. But Labor now has the opportunity to join with us to kill this bill stone dead.

This is a two-year fund that will last for the duration of this government. If Labor wants to do its own thing, if it wins the next election, then let it; but it should join with us now to stop this legislation. As the member for Grayndler, the shadow spokesperson, said in his contribution:

This asset recycling initiative is a fancy-sounding name for privatisation of state assets and a reduction of Commonwealth spending on infrastructure.

   …    …

The fund is an emblem for this government's political cowardice and lack of vision both when it comes to actual investment and to probity standards. The term 'asset recycling' is a different way of saying privatisation: the sale of existing public assets that are owned by the Australian people.

He is right, which is why the Greens will be opposing this bill. But I am not sure that he consulted with his Victorian opposition leader before putting this out, because the Victorian opposition leader, Daniel Andrews, who is going into an election at the end of this year, in his 'Project 10,000 trains, roads and jobs', which comes out under his signature, said:

Asset Recycling Process using the Victorian Transport Building Fund—

which is selling off the Port of Melbourne to fund some projects in Victoria. He continues:

In developing 'asset recycling' concept, Victorian Labor has closely monitored the progress of a similar program undertaken by the State Government in NSW.

He goes on to say:

Victorian Labor believes this approach is a common sense way to get things done without taking on unsustainable levels of debt or compromising investment in other important areas like health and education.

So which is it, Labor? Is asset recycling cowardice and an ideological front, or is it your election policy in Victoria right now?

Labor will have an opportunity shortly to decide and to help kill this bill stone dead. To stop this short-term fund being established, which will only benefit this government, I move the following amendment to the motion that the bill be now read a second time:

That all words after “That” be omitted with a view to substituting the following words:

“the bill be withdrawn and redrafted so that it is renamed the Encouraging Privatisation Bill 2014 in order to better reflect:

(1) the true purpose of the bill; and

(2) that the bill aims to encourage state governments to sell off public assets as quickly as possible, in part to make up for the shortfall in Commonwealth funding to state governments arising out of the 2014 Federal Budget.”

We now have a golden opportunity to stop this toll road slush fund stone cold dead, and to put the final nail in the coffin of Prime Minister Tony Abbott's privatisation agenda. Very shortly, in a matter of minutes, and then again in the Senate, probably in a matter of days, the question will be where does Labor stand—is asset recycling, as the member for Grayndler said, political cowardice embodying a lack of vision and a different way of saying privatisation, or is it something that Victorian Labor wants to be elected to implement?

The DEPUTY SPEAKER ( Mr Goodenough ): Is the amendment seconded?