Privatise for efficiency or not at all, says ACCC chief


30 July 2021

Competition watchdog Rod Sims says governments should either privatise to improve the efficiency of our economy, or not privatise at all.

He has called for limits on government privatisations, saying the public has lost trust after seeing prices spike after the sell-off of assets.

Privatising assets without allowing for competition or regulation creates private monopolies that raise prices, reduce efficiency and harm the economy, the Australian Competition and Consumer Commission (ACCC) chair  Rod Sims said in a speech on Thursday.

Speaking at the 2021 ACCC/AER Regulatory Conference, Mr Sims discussed the need to either avoid monopolies, or if not then regulate them, to prevent costs to the economy arising from unfettered use of their market power.

Mr Sims put forward two possible solutions to avoid privatisations creating future unfettered private monopolies.

“One potential solution is that all governments agree not to privatise an asset unless there has been a prior public regulatory and competition assessment by a Commonwealth or State regulatory body,” Mr Sims said.

“Another approach would be for a market power test to be introduced to determine whether assets with significant levels of market power should face some form of regulation.”

“These are important issues that deserve more discussion among those interested in the health of the economy,” Mr Sims said.  

Many monopolies are subject to regulation, such as gas pipelines, electricity networks, railways and the NBN. In contrast, many ports and airports, which are essential gateways for our economy, are largely unregulated, mostly due to decisions made when they were privatised.

This lack of regulation of monopolies may increase the sale price, but ends up being, via higher prices to justify the higher sale price, a multi-decade tax on Australian consumers and exporters, the ACCC said.

The ANMF (SA Branch) has long campaigned against privatisation of our public health services in many forms, from the expensive outsourcing experience at Modbury Hospital (1995 - 2007), through to the more recent public private partnership (PPP) model used for the redevelopment of the Royal Adelaide Hospital.

For the ANMF, this has led to a respect for the particular role played by the private hospital and health care systems in complementing the public system whilst protecting the value and distinct role that public services play in securing the health care of our community.

“The only way companies make a profit out of essential services is by trimming from the top … trimming services, trimming staff numbers and charging more,’’ ANMF (SA Branch) CEO/Secretary Adj Associate Professor Elizabeth Dabars AM said.

“Invariably what happens, as was the case with the failed Modbury Hospital privatisation, they keep coming back for more and more handouts … it ends up costing the taxpayer more than it did when it was publicly owned. The taxpayer ends up paying more for less.”

Governments also pump up the prices of assets by selling them with sweeteners such as a ban on competition attached, The Guardian reports, with Mr Sims naming the $4.2bn sale of Sydney Airport, 20 years ago, as one of the worst he had seen.

The NSW Government rolled back regulation of the airport to increase the sale price, he said.

“Not only did they not impose it – it was already there and they took it away to maximise the proceeds of sale – but also they gave Sydney Airport owners the first right of refusal over any other airport to be built,” he was quoted by The Guardian.

“I mean, just appalling.”

He said the removal of this right by the state government meant Sydney Airport would finally face competition from a new airport in western Sydney.

“You’ve had the Port of Melbourne, where the original idea was to put up land rents that the port could charge the stevedores by 750% and not allow a competing port to be built for 50 years,’’ Mr Sims told The Guardian.

“Now we agitated about that and got that 750 down to 30% and 50 years down to 15, but it was a bit of a fight.”

Mr Sims said the sales of Qantas and Telstra were examples of good privatisations “done to improve economic efficiency, because the government wasn’t an efficient owner of those assets and needed to get someone who could run them more efficiently”.

“Now, we seem to be in a world where you’re privatising to maximise the proceeds of sale – which is fine if you’re selling your car,’’ he was quoted.

“It’s not fine if you’re a government, and you’re limiting competition, you’re closing off competition so you get a higher price for the asset, and having created a monopoly, not regulating it so that it’s got unfettered market power.”

He told The Guardian the badly run sell-offs “cost the economy an enormous amount” and the public had turned against privatisation.

“Why don’t the population like it? Because they see prices going up,” he said.

“So, the public have worked this out, and we won’t get more privatisation. For those who want more privatisation, my point would be do it properly.”