Imagine you are sitting alone in the corridor opposite the door to the room in which the elected members of Government are debating the sale of “Roo Infrastructure”, an icon. Your job as a public servant is to brief those in the room on facts, on the hard facts of the likely proceeds and other net benefits to be reaped from such a sale. Your audience will be hostile, with most of those in the room not wanting to analyse what you have to say. They have already determined their position on the Treasurer’s proposal.
Privatisation of assets has been debated for some time, certainly since the then Federal ALP Government commenced a round of sales in the 1990s. It started in earnest with the sale of Commonwealth Bank shares in 1991. The Bank was operating in a competitive environment. A major factor in support of the sale was the capital adequacy guidelines for the banking industry. Guidelines that were introduced to apply to the sector, irrespective of bank ownership. It continued with the sell-down of Qantas in the period 1993 to 1995.
The Howard Government sold the remaining stake in the Commonwealth Bank in 1996, for a heady net figure of about $5 billion. 1996 also marked the year the Queensland Government of Rob Borbidge commenced its sell down of the merged Suncorp-Metway entity.
The privatisation of over 70 public entities across Australia has given rise to the notion of asset recycling as an acknowledged way of creating more desperately needed infrastructure, in an economic climate where governments remain burdened with high debt levels, high service expectations, and increasing demand for transparency in their decisions and activities.
After a considerable amount of practice, the regulatory environment that provided comfort in selling the Commonwealth Bank, has perhaps reached an acceptable level of oversight to protect consumers. Financial regulators (such as the ACCC, AER, APRA, ASIC, PHIAC, AFSA, the Council of Financial Regulators, to name a few at the Federal level), and safety regulators (CASA, ONRSR, Food Standards, AMSA, ATSB, Government WH & S agencies, etc), generally encourage at least minimum standards aimed at protecting us, irrespective of the form of ownership.
The $37 billion in assets that the Queensland LNP Government has signalled for potential sale should they be re-elected will enable significant investment in necessary new infrastructure. Sale proceeds could also be applied to the upgrade of existing infrastructure such as the Bruce Highway, the State’s primary road but one that is closed regularly due to flooding.
The Chamber of Commerce and Industry Queensland says a significant amount of investment is required in Queensland to support population and economic growth into the future. In September 2014 it released a list of key infrastructure priorities for each of seven regions across the state. Population and economic growth in Queensland over previous decades has caught infrastructure providers short. There is a backlog of infrastructure needs to be remedied, particularly but not exclusively in the transport sector.
To this end, it is worth looking at the Port of Brisbane Corporation, which the State ALP Government of Anna Bligh sold in 2010, at a price of $2.1 billion for a 99 year lease. The deal also included a $200 million plus financial contribution to the expansion of the port motorway. Today the Port is investing in analysing options for enhanced freight links, looking to cater for future growth. It is one of the fastest growing multi-cargo ports in Australia, handling more than $50 billion worth of trade pa, mostly to and from Asia. Almost 95% of Queensland’s containers and motor vehicles pass through the Port of Brisbane, along with almost 100 % of Australia’s meat exports. It recently became the only Australian port to host three stevedoring operations, all using automated container handling equipment. One of the three, DP World, has spent $250 million on the introduction of automated processes.
The port supports over 4,000 employees in the maritime sector. The outgoing CEO, Mr Russell Smith has advised .. “since privatisation, PBPL [Port of Brisbane Pty Ltd] has invested significant resources into identifying and championing sustainable, balanced transport solutions, including freight rail, which can support Queensland’s growing freight task.” Led by diversified ongoing trade growth, the port has “a substantial capital base for investing in infrastructure.” No longer is this investment and growth the responsibility of the State Government. No longer do the risks and rewards of this type of investment need to be factored into government budget deliberations. And no longer does the Government have to resolve the inevitable conflict that arose when it performed the dual roles of investment decision maker and development approver.
Historic data recently published by the BITRE notes that between January 1993 and June 2013 Australia’s GDP rose by 75%, whilst container traffic grew by 250%. Australia is an island nation, with shipping accounting for over 98% of Australia’s total trade by weight. The long-term outlook for the cruise shipping industry is also positive, largely due to the projected economic growth in the countries of origin of cruise passengers, particularly the USA. The future is strong but Australia needs ongoing investment for the economic and social outcomes we desire.
The arguments should not be about philosophical political differences. At various times, ALP and Conservative Governments have committed to privatisation. The arguments need to move beyond the ownership of assets and focus on future needs and how best to achieve these. Instead of treating you as an enemy, or best the conveyor of bad news, those Government members assembled before you should be assessing the incentives for responsible growth, the right amount of regulation and no doubt, the right management of the sale process.
The key is to have the smartest, most practicable leaders in both the public and private sectors to develop and implement the long-term strategies for asset recycling, taking a more holistic and far-sighted approach to the sale of ‘Roo Infrastructure’, to the maintenance of the ‘Not-quite as old as Roo’, and to the construction and operation of the ‘New Roo’.