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