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Faction deal compromises benefits of FAC sale

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The deal between ALP factions to secure agreement over the proposed privatisation of Federal airports has undoubtedly compromised the potential benefits to airport operators and airport customers, including the travelling public. Key points of concern include:

The "preference" given to- superannuation finds: Superannuation funds have a duty to their members to seek the best available rate of return at an acceptable rate of risk. They should not be "compelled" or "directed" into investment in airport infrastructure. Moreover, the proposal to attract passive superannuation funds

appears to go against the objective of introducing competitive and experienced management into the operation Australia's airports.

• The decision to sell 50 year leases: While in theory there should be little difference in the value between the present value of a long-term lease and perpetual freehold title, private sector purchasers will discount the value they are prepared to pay if there are restrictive conditions placed on a lease. Under the terms agreed to

in the factional compromise, and in an environment of rising interest rates, it is very unlikely that the Government will receive anything like the $2.3 billion estimated by BZW, consultants to the Government's scoping study.

The proposal to redeem FAC debt: This is nothing more than a bandaid solution that does nothing to improve the long-term viability of loss making airports. If this is not addressed, necessary future capital expenditure will not he undertaken by private sector investors and the standard of airport services will deteriorate.

If the Government is going to pursue privatisation, it should pay more attention to getting the fundamentals right, rather than pandering to the confused mass of ALP factional interests.

The deal worked out by Mr 13rereton with the Left and the Centre Left factions will undoubtedly detract from the competitive process and the value received for the sale of airport leases. As was the ease in the ANL fiasco, it will be Australian taxpayers who end up bearing the cost of Mr Brereton's incompetence and mishandling of the privatisation of

our national transport infrastructure.

27 September 1994

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For further information contact John Moore on (07) 878 2660.