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Wednesday, 11 March 1998
Page: 1038

Mr PROSSER (7:22 PM) —In many countries where privatisation of government business enterprises is under way, the process is seen not merely as an element of economic policy but central to government initiatives to establish and nurture democracy. In Australia, the privatisation of government business enterprises has contributed significantly to the budget outcomes of the federal and state governments. In the case of Victoria, the privatisation of government businesses has increased the state government's revenue through asset sales and efficiency savings following the successful privatisation of poorly run government enterprises.

The proceeds of the privatisation of Victoria's electricity industry alone have reached some $22.9 billion. This revenue has been used to lower Victoria's state debt from $32.3 billion in 1992 to $12.4 billion in 1997. Put another way, Victoria has reduced its net debt from $7,000 for each Victorian to $2,500. According to the Australian Bureau of Statistics, this is the largest decrease of debt for any state or territory in history. The Victorian government has also saved $2 billion in state taxes and charges since 1993 as a direct result of these privatisation measures.

A good example is the Victorian state government's car pool, where the number of vehicles dropped from 24,000 to 10,000 after the government contracted the car pool out to the private sector. These and other savings gained from successful privatisation programs in Victoria have enabled the government to provide capital for long-term projects such as the four-year $100 million turning the tide drug strategy and the $25 million suicide prevention program. (Quorum formed) As a government, we pursue the privatisation of government business enterprises because we realise the improved efficiency that introducing competition brings.

We believe that allowing the market and shareholders to assess the performance of previously state owned enterprises confers greater benefits to the Australian public. We pursue the privatisation of government business enterprises because we believe that the government should not run businesses that can be run more efficiently by the private sector. ANL is one such case. Under the previous Labor government, ANL performed poorly. In 1991 ANL's accumulated losses were $41 million. In 1993 these losses had grown to $57 million. The following year, these losses were more than tripled to $187 million, giving ANL a debt to equity ratio of some 160 per cent.

In 1994, a due diligence report conducted by Price Waterhouse and the Salomon Brothers for the Commonwealth Task Force on Asset Sales said:

ANL has represented a poor investment over the past twelve years for the Commonwealth. The Commonwealth injected $160.5 million in equity between 1983 and 1985 yet received only $20.7 million in dividends between 1983 and the present day.

In 1994, the CEO's report stated:

There are various reasons for these losses which reflect ANL's position as a relatively small container shipping line in world trade terms. ANL has to compete with rapidly emerging round-the-world `mega-carriers' whose east-west services are supported by north-south feeder services to hub ports, not to mention other international lines many times its size. The economies of scale enjoyed by these lines, particularly in the areas of equipment utilisation and repositioning, cannot be replicated by ANL without changing its international relationship.

Neither the due diligence report nor the chief executive officer's comments were convincing enough for the Labor government to act. Labor continued to throw taxpayers' money at ANL instead of taking the tough political decision of reducing the public's debt burden by selling ANL.

The due diligence report was also highly critical of ANL's financial forecasting. The December 1993 business plan for ANL forecast earnings before interest and tax of $7.9 million for the year ending 30 June 1994, whereas ANL's estimate for that year, as contained in the June 1994 strategic plan, was negative $12.6 million, representing an underperformance of some $20.5 million. ANL's forecast on a pre-tax basis has been at least as poor. As at August 1994, ANL's assessment of its consolidated pre-tax results for 1993-94 is a loss of some $23.5 million against a budgeted loss of $2.4 million. They lost $23.5 million; they budgeted to lose $2.4 million. Why on earth, on that basis, did Labor fail to sell the ANL?

Mr Slipper —Tell us.

Mr PROSSER —Labor failed to sell ANL because they could not tackle the waterfront union. That is why they failed to sell the ANL.

Mr Rocher —Laurie said he would give it away.

Mr PROSSER —The member for Curtin is quite right. The former transport minister, Laurie Brereton, said, `You could not sell ANL; you actually could not give it away.' You actually could not give it away, because these guys drove it through poor management into the ground. It is because they would not take the tough decisions. They would not take the decisions that needed to be made.