Christopher Niesche: Australian tide turns against privatisation

Rod Sims, chair of the Australian Competition & Consumer Commission. Photo / Supplied
Rod Sims, chair of the Australian Competition & Consumer Commission. Photo / Supplied

For many years politicians and business people have told us privatisations are good.

Selling government-owned assets to the private sector makes them more efficient, to the benefit of us all, they have said.

It was a view shared by Rod Sims, chair of the Australian Competition & Consumer Commission, but he's now on the verge of changing his mind, saying privatisations are pushing up prices for consumers and damaging the economy.

"I've been a very strong advocate of privatisation for probably 30 years," Sims said at the Melbourne Economic Forum last week. "I believe it enhances economic efficiency [but] I'm now almost at the point of opposing privatisation because it's been done to boost proceeds, it's been done to boost asset sales, and I think it's severely damaging our economy."

He now argues that, instead of privatising assets such as ports, airports and power infrastructure to boost economic efficiency, Governments are just trying to maximise their profits. They do this by selling monopolies to the private sector without enough regulation to rein in excessive price hikes, thereby making the sale price higher.

"I am getting more exasperated. I just think Governments are more explicitly now privatising to maximise the proceeds," Sims said. "They are explicitly saying the reason they don't want to do this or this is that it'll damage the proceeds they are getting. They're not even playing the rhetorical game any more."

Sims is echoing the suspicions of much of the general public, who have long believed that prices rise when government assets are sold off. But it has mostly been the man in the street who has said this. For many years, anyone who opposed privatisations in Australia was dismissed as a fogey, a lefty and perhaps a bit of a crank.

So it is quite extraordinary to have one of Australia's most senior economic regulators come out so strongly against privatisations.

But left-wing fogeys shouldn't get too carried away by Sims' comments. He is still in favour of the "theory" of privatisations: that they generally increase economic efficiency and bring down prices for consumers.

He points to the privatisations of Telecom (now Telstra) and Qantas. We do indeed have cheaper phone services and air travel but this is largely because Telstra and Qantas were privatised about the same time their industries were deregulated, introducing the disciplines of competition into the equation as well.

Privatising a monopoly is different altogether.

Sims' problem is with the current wave of privatisations, done only to raise money - and as much money as possible - for Governments. He came to his conclusion after NSW's A$1.75 billion ($1.8b) sale of a 99-year lease to Port of Newcastle. Straight after the sale, the fund manager and the Chinese Government-owned company which bought the lease hiked the price charged to load coal on to ships by 40 per cent.

It's not a new problem. When the Federal Government privatised Sydney Airport about 20 years ago, it doubled landing fees just before putting the airport on the block.

Hopefully, Sims' comments will lead to Governments being held to account for why and how they carry out future privatisations.

The ACCC has been dragged into the banks' argument with Apple over digital wallets. Photo / iStock
The ACCC has been dragged into the banks' argument with Apple over digital wallets. Photo / iStock

Apple pay

Meanwhile, Sims will be kept busy after being dragged into the banks' argument with Apple over trying to get their digital wallets on to iPhones.

Four major banks have asked the ACCC for permission to collectively negotiate with Apple over access to their own digital wallet products on its phones, tablets and watches. Usually when companies in the same industry unite to negotiate something it breaches competition rules.

Apple has so far allowed customers of only one Australian bank - ANZ - to pay with the iPhone, and this is only on Apple's own digital wallet, Apple Pay. ANZ has reportedly surrendered some of the credit card interchange fee which makes up its profit to Apple, presumably deciding it was better to give up a bit of margin rather than be cut out altogether.

The other banks want their own proprietary wallets on iPhone and are concerned they will be cut out of what is sure to be an increasingly important source of revenue.

It may not be too long before many more physical purchases are made using an iPhone than a credit card.

But iPhones are built to block any other financial institution from accessing the phone's near field communication function, or NFC, which lets the phone "talk" to payment terminals, such as Paypass.

The banks hope that together they can convince Apple to allow their digital wallets on to iPhones. But even if the ACCC does grant their wish, they're still a long way off persuading Apple. The US technology giant has shown time and time again that it plays hardball with commercial negotiations.

And it's hard to see at this point what incentive Apple would have to give up or share what is sure to be a huge stream of revenue in future.

- NZ Herald

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