Anna Bligh's privatisation train will run off the rails
June 2nd, 2009 by Mark Bahnisch | Published in Brisbane, Disasters, Economics, Queensland, Sociology, Transport | 49 Comments
Intoning the phrase ‘Global Financial Crisis’ at every opportunity, Queensland Premier Anna Bligh has been preparing the ground for the privatisation of a wide range of state assets. It was confirmed today that QR’s freight train business would be among the government owned enterprises flogged off.
Bligh seems to be assuming that selling the freight business will be less unpopular than privatising passenger rail. Maybe, maybe not. The unions are certainly unhappy. But hiving off the profitable bits of QR is just nuts. Aside from the economies of scale that will be lost, the lack of a cross-subsidy for public transport will cause immense problems further down the track. That will be compounded by the government’s quick return to an aversion to public spending, which is a complete backflip from its winning electoral message.
Queensland Labor never previously went down the privatisation track favoured in other states. Peter Beattie was happy to retain some fat in QR over a period of years to cushion the impact of restructuring on jobs. There’s also previously been a perception that diseconomies would result from selling off profitable bits of public assets in such a geographically huge state with such a dispersed population. Cross-subsidy is the only model that works for public services in this state.
The Nats knew this as well, which is why the short lived Borbidge government never adopted the 90s fashion for privatisation.
This is a decision for the South-East corner, and for business elites.
The politics of this, as well, are just dumb.
And then there’s the fact that – as with most privatisations – the taxpayer will be no doubt dudded, as public assets built up over more than a century are flogged off at the height of an economic downturn.
Not happy, Anna.
Elsewhere: John Quiggin.
I agree Mark. The assets are not distressed, so why shove them out the door in a fire sale?
The privatisation of public assets that the state Liberal government flogged off to their mates, both national and international, here in SA a decade or so ago was ideological in motivation and a disaster for the people of the state since.
‘Privatisation’ is, or at least was cos memories fade over time, a dirty word here for years after the barbarians got inside the gates and sold the societal treasures.
For Queenslands sake don’t let it happen there!
Aha, so this is why Paul Cronin, media-meister to Bligh, out of Beattie, out of Mackenroth, was bumped in to Queensland Rail , to ride PR shotgun over this merde. Should be some excellent boardroom opportunities in it.
Oh no! Can’t be long before the renowned NSW government attempts the same thing here.
The first thing the LNP said when they first heard the government talking about selloff plans was that it was crazy to be selling in a downturn. This may not always be true but it would not be unreasonable to expect something better than GFC!! panic panic panic.
Anna needs to learn that Australian voters respect politicians that make hard decisions when needed. We need to see signs that pragmatic consideration has been given to alternatives such as borrowing or lifting royalties, taxes or charges.
Thanks for this post Mark. And I just want to say this. Privatisation only works when the Asset or Corporation you are selling operates in a competitive environment. When they have to compete with other companies for their business then it will work. There are examples of this e.g Qantas. But where privatisation doesnt work is when the Asset you sell has the automatic monopoly of the market. E.g Qld Motorways, Forestry Plantations Qld and QR. This gives scope for the owners to do whatever they want in regards to price rises and fees, and the ultimate conclusion is the consumer cops it sweet.
But this also poses a problem for the LNP. Because if they oppose Bligh’s privatisation and fuel subsidy plans, then they will have to come up with other alternatives to repay the debt and prop up the budget.
Jamo is absolutely right. Privatising monopolies is almost always a disaster in Australia. And even worse when it’s monopololies that encompass a significant public good (i.e. will require significant regulation+ govt intervention) it’s even more fraught. Stupid. And wildly unpopular with the public almost every time.
Though I will say in my opinion Australia Post is a good example of privatisation done right.
That is, not done at all? Or have I missed something?
The reason for the early election is now revealed.
…but hiving off the profitable bits of QR is just nuts.
Well gee, no-one is gonna want to pay for the unprofitable bits, are they? Of course if you sell bits you are only going to sell the bits that someone can make a quid out of.
Regardless of the abstract merits of privatisation, BTW, it is the purest window dressing to prop up a current budget with it – it depends on being able to bring to book the proceeds of the sale without counting the lost future profits. Don’t blame Bligh for this but – if ratings agencies are too stupid to do proper accrual accounting then she should take them for the fools they’ve shown themselves to be.
Perhaps she could look across the Tasman for a great example of how privatising rail goes… and the perils of selling it to a trucking company especially. NZ recently bought back their rail freight from Toll after Toll ran it into the ground, sorry I mean “made significant profits over a number of years”. They basically stopped all maintenance and used it as a marketing tool for their trucking business.
Adrian, Australia Post shops are private franchises. The mail service as such is still publicly owned and run, however each post office is a private entity that must meet certain conditions for approval, but also has some leeway in other areas. Hence why Australia Post shops are looking more and more like a megamall, but the mail still gets delivered on time, which I think is a pretty good compromise.
hannahs dad @ 2, as I’m sure you know, Media Mike’s won the last three elections mainly on the back of the Libs having flogged off ETSA and the E&WS to the lowest bidder.
It’s still a vote-winner.
The point, dd, is that then you have no QR assets producing an income stream that you can use to invest in the maintenance and upgrading of the unprofitable bits – ie passenger rail. That then either has to come off the budget, or more likely, get run down, or even more likely, we end up with a Connex style disaster.
And she was – just until she won the election.
Mark, I think dd’s argument is that the ratings agencies will allow Queensland to borrow money more cheaply if it flogs off QR’s freight rail operation, than they would otherwise.
This is stupid, but that may well be the way it is.
Not convinced about the merits of cross-subsidization – if we’re going to subsidize unprofitable things for social goals, let’s be honest about it – but in general governments do seem to run train systems better than private enterprise, pretty much everywhere in the world.
Firstly i think the move to scrap the fuel subsidy is probably good in the long term. Not knowing any specifics i am assuming that it will make things harder for farmers or transport companies and families in tarago’s with a wheelchair in the back in the short term (guess based on how fuel policy normally gets the rent-seekers out) but in the long term i don’t see how a blanket fuel subsidy is particularly good policy what with global warming and all.
Well, the coal business is going and bulk freight might go in the future. Presumably they will still own the rail network. They are selling a bunch of roads as well to even up the ledger.
I would agree that selling profitable rail is silly stuff coming from a government that just got re-elected espousing the virtues of spending in a downturn including the need to run deficits regardless of what ratings agencies have said. Perhaps if there was strong competition in the coal sector it would be a better idea, certainly that would make selling bulk freight/intermodal services a better idea. Can’t help but think this kind of sell-off is judged as being easier politically than cutting in other areas to have a balanced budget “over the cycle.”
NSW showing true leadership as always, we try to sell electricity assets in a downturn and Anna Bligh just says ‘me-too.’
Bloody hell. What short-shelf-life species of moron is advising her on economic policy these days?
Hey Quinceland ALP brainstrust: have a look at Victoria. Privatizing rail wont save you a red cent, since no one can or will operate it without massive state subsidies, and then they’ll have you over a barrel to provide extra-contractual payments as well. Your projections aren’t worth the paper they’re on.
They WILL however turn services to shit.
Why would anyone – even an economic rationalist – possibly imagine that a private monopoly will lead to efficiencies? It doesnr even make sense to neoclassical economists.
STOP WRONG WAY GO BACK!!
I don’t think, Rob, that there was ever any pretence that it was otherwise in Queensland. It would simply be impossible to run a profitable passenger transport business in a state like this, unless one carved up the network and cherry picked the metropolitan lines and then cut costs and services.
On DD’s point, sure, but they could also be borrowing money under the auspices of the Feds. It’s some dumb political cover about the ratings agency downgrade.
Mark Bahnisch says:
Good to see Mark acknowledges that the QLD NATs governed for much of the state. They frequently did a fair and reasonable job of building infrastructure and was way ahead of the curve in encouraging coastal development.
Perhaps there is a lesson to be learned here about the perversity of scholars rushing into political committments. At this point savourers of political irony will enjoy a replay of Mark Bahnisch’s gushing welcome to the Privatising Premier on the morrow of her narrow electoral victory:
We’ve seen this thing happen before on the morrow of K Rudd’s electoral triumph.
Not that QLD intellectuals are uniquely susceptible to this foible. Left-wing politicians routinely play Left-wing intellectuals for suckers. Its called Betraying their Base.
I wonder how long it will take before Left-wing intellectuals realise that if they make themselves a cheap date they are bound to wind up scr*wed.
[Creaking, grinding and crashing sound as Hell slowly freezes over.]
Look, especially after the great historic failure of practically all privatizations at state level, and the fact that voters well and truly turned against it 10 years ago – and Victorian politicians wish it had never happened (despite not turning the clock back) – Bligh’s move here does not represent some species of ‘political courage’, as its being spun.
Its just a complete failure of political imagination, and a mystifying, dunce-cap-wearing mistake of the popular mood.
FAIL. Expect to lose next election, ALP doofi.
The privatisation of electricity supply sent prices skyrocketing; now Anna Bligh wants to do more of the same by pushing up the price of petrol and flogging off public assets (in a down cycle) so that the public pays much more for much less.
And why? Since there’s nothing but “IOU: hundreds of millions for an unnecessary pedestrian bridge” notes in the gummint kitty.
The LibNat leader “Brother Of” Langbreok (sp?) must be sending Anna flowers right about now …
And we also have Public Private Partnerships re Schools’
Anything to keep the ‘bottom line’ looking good. But only in the short term of course.
patrickg
as I understand it, some Australia Post shops are privately owned, but many are not. Our local experience is that the worst (slowest, rudest staff, etc) is publicly owned, but it seems the smallest are private. I’m not sure whether there’s a pattern or policy.
By any measure QR National will continue to grow. We may be in global recession but China is not going anywhere nor its insatiable appetite for coal. What’s more, the container business has finally got a foothold south of the Tweed which only gets stronger as the Commonwealth spends more on upgrading the east coast line and rail’s share of the freight task increases (and we might even get around to building that long-mooted Brisbane-Melbourne rail link, too).
There are sensible arguments that QR can compete better with Pacific National as a private entity that doesn’t have to account to government for every dollar spent – and business and the economy NEEDS a thriving rail sector to improve supply chain efficiency. But given the potential for growth it’s hardly the time to sell.
Methinks Lefty E is confusing passenger and freight rail. I believe he is a ‘Mexican’ (no relation to that guy who ran Telstra) and so would be perfectly entitled to some worry over the idea of privatising rail. And yes, this is backwards short term policy on the run (perhaps the premier should stop running those marathons, it’s giving her the wrong ideas) and contracts that guarantee profits to private companies from governments no matter how bad the service is, are unbelievably stupid.
However, as Jason W has pointed out, investment from ARTC is beginning to allow rail to take the market share that it is capable of. I don’t think it is beyond the realm of possibility that there could or will be growth in the number of companies working the Bris-Syd-Melb corridor. When they began rail had less than 30% of traffic Melb-Bris with their share of Melb-Syd and Syd-Bris less than 10%. Compared to the 80-90+% share on trips to Perth it looks pretty pissy. I think the pressure that private companies bring to improve service levels, let alone the pressure that China can bring, is just a touch more than private citizens, regardless of how fired up they are, can bring when their anger is filtered through governments.
Just a small point that any private monopolies are likely to be regulated by the ACCC.
For anti-competitive practices, Sacha?
You see the problem there…. :)
OT, but some clips from the NFSA:
1987: Australia Post – Post Office Spruce, “Post Office makeover”
1988: Australia Post – Meeting the Challenge, “Motivation to compete”
1990: Australia Post – Australia Post Inc, “A commercial enterprise”
I couldn’t resist after seeing the artist’s impression in the last clip ;)
Street View: 153 Macquarie St Parramatta
# 21 Lefty E Jun 2nd, 2009 at 5:35 pm
AUS is evolving into a one-party state. We have an ALP hegemony, not “ANNA heterogeneity”, as Mark fondly hoped.
The take-home lesson from the 2009 QLD election is that the ALP is the Natural Party of Government. Contra Lefty E I predict that the ALP will continue to win state elections in VIC and QLD and probably other states, way in excess of cyclical swings of the electoral pendulum would suggest.
The ALP’s demographic head start (aging Baby Boomers grabbing hand-outs and ethnic lobbies currying favour will naturally gravitate towards it) gives the head honchos the ability to thumb their noses at its Leftist Base. Considered a feature, not a bug, by most senior apparatchiks.
Its possible that the ALP’s political dominance enables the machine’s entrenchment of a spoils system of patronage. Thereby letting the Economic Right dictate policy, as indicated by the sell out on CPRS and the privatisation of public assets.
In short we have to look at the ALP as a post-modern incarnation of “machine politics”, where it is in the interests of the party to win a bare majority and monopolise the spoils of office for “insiders”. Wikipedia has the goods:
Sound familiar?
With very little effective pressure from a mass-based Economic Left the ALP are bound to take the path of least resistance. Privatising state assets means kick-backs from contracts go straight to the inner circle of the party. No point in diluting the spoils amongst all those burly union members.
I have been predicting that the ALP will swing back to the Left once this political hegemony is established, in the aftermath of decisive victory in the 2010 election. But the fact that the ALP can rely on a predominantly Left-wing populus for political dominance may allow its executives to favour Right-wing policy interests.
So now I am not so sure. Most likely the contradictory pressures of a Left-wing polity dominance and Right-wing policy interests will cancel out leaving Rudd to steer a middle “steady as she goes” conservative course.
Thats the best prediction I can make at the moment. Anyone else got any better ideas?
Other stuff aside, I was under the impression that Q Forestry’s been heading towards privatisation for quite a while now, and that they were expected to go fully private within the next decade anyway. Seems a bit disingenuous for the current gov’t to be acting like that was even their idea…
Actually, I pretty much agree Jack.
I just HOPE they lose if they pursue this ridiculous path.
The ALP’s demographic head start (aging Baby Boomers grabbing hand-outs and ethnic lobbies currying favour will naturally gravitate towards it) gives the head honchos the ability to thumb their noses at its Leftist Base. Considered a feature, not a bug, by most senior apparatchiks.
But what may work in other states may not work in Queensland, the home of agrarian socialism. National voters (the biggest piece of the LNP) like their pork. I guess they probably hate the idea of selling off assets at bargain basement sales to their parties, who then go on to charge inflated prices for freight. I don’t know for sure, but I guess there’s going to be a lot of revulsion in country Queensland against privatisation.
As for me – Anna pulled off what I thought was impossible – she’s actually made me think about preferencing the LNP. I’m going to vote Green 1 – but it’s either the LNP or nobody who gets 2. I live in South Brisbane, so it doesn’t matter too much how I vote.
It is very important that people realise that there was a candidate who ran in the Queensland State election on the issue of no privatisation.
He has records of the ABC persistantly refusing to cover this issue or to let the public know that a candidate was running on it, even though he could show that the public deeply opposed privatisation and that it was the ABC’s job to let the public know of alternative candidates on important issues. He also emailed Anna Bligh, the premier, with cc’s to a variety of people, including various Greens and Liberals.
Today the press is full of how angry Queenslanders are about this pretend sudden idea to privatise, and there is a call for a referendum.
Given, however, the press record of managing such outcries into silence, I want to suggest that we try publicising this via alternative media organs like this one.
We can help to bring this evidence to light by letting as many people we can know about this evidence, suggesting that people go look at:
http://candobetter.org/QldElections.
I think we could call for a referendum on the basis of these articles and for an inquiry into the failure of the ABC to do its job here.
At least try to help embarass the powerbrokers:
Jamo- it poses about as much of a problem to the LNP as it did to Baz O’Fattel and the Libs southwards re- power privatisation. Minimal.
For a Labor government to sell privatisation as many say- we need the debate at least (we haven’t got it) and the government needs to be a particularly gifted one (this isn’t).
Errrrr…where is the real left of C party in this state when The Greens are consitently mute on everything their masters do? An new party is needed.
As a train driver for QR Regional Freight, many of these comments are fascinating in all sorts of ways.
Unfortunately, as a train driver for QR Regional Freight, I’m really not in a position to make a public comment…
Sorry.
It is time for all unions to campaign against Bligh. She is the biggest sell out. She ignores just pay claims from teachers and now she is selling off state assets. What is the point of a Labor government? No point. A bunch of power hungry sell outs who stand for nothing.
“It is time for all unions to campaign against Bligh.”
And campaign for?
Privatization is great news! In Victoria our transport system was privatized and it is so populular that the trains are now packed to the rafters. You can hardly move, its so popular.
And they wonder why their inner city seats are threatened by the Greens!
non-violence, the ALP knows quite well we have nowhere to go. The other lot would be even worse. (Which is why I vote Green.)
It is a disgraceful decision to sell of QR! It will make the budget bottomline worse off in the longterm! I hope that people within the party can agitate for a rethink on that policy.
No one asked Anna Bligh or Andrew Fraser to play corporate raiders.
When they purhased WA Rail they were gambling with Queensland Taxpayers money.
Yes she brought that asset for top dollar.
If you want to remove debt then the first to go should be your mortgaged debt. Not your unemcumbered cash cows.
Its like the 9 Billion dollar white elephant she brought.(The Grid) We still cannot transfer water between the dams which was the priority of the grid system.
Water is still being released and destroying homes with none being transferred back into Wyvanhoe.
Economic rationalism or Transfer of debt to private and back again to public and so on is a failure.
Its time for the return of the real labor Party the DLP
Bring it on as this lot have lost the plot
Ziggy
Take their names! Take their names!
Lefty E, many large privately and publically owned monopolies are currently regulated (e.g. the revenues for electricity transmission and distribution businesses are regulated by the Australian Energy Regulator, a body that is part of the ACCC).
The point is that, if only for political reasons, it’s pretty likely that any private monopolies would be regulated by some entity, possibly the Queensland Competition Authority.
Often they’re ‘regulated’ under service agreements (ie contract) with state governments. In either case, regulation of private monopolies is next to useless – since its normally more efficient to just pay penalties than improve services, given the lack of anywhere else for the consumer to take their business. And the state still pays for the infrastructure improvements. User pays twice.
At least we can sack a government in the case of public monopolies.
It sounds as if the incentives under service agreements aren’t aligned properly with the desired outcomes. This can happen with organisations regardless of ownership structures – and sacking a government may not change the incentives that an organisation works under.
In the sector I’m most familiar with (electricity), network businesses have incentive schemes which allocate or remove revenue from the business depending on whether or how the business meets particular service levels. These attempt to align incentives of the network with designed outcomes for users.
Similar arrangements may or may not appropriate for monopoly businesses more generally, regardless of ownership structure.
#38 terangeree, would have liked to hear what you had to say. But here is what Owen Doogan from the Rail, Tram & Bus Union had to say on ABC radio agreeing with rural industry leaders about the current situation of QR freight operations. Here on the same ABC radio program from the same union is further comment. Scroll down the page & look for story entitled “More freight trains cancelled”.
Not only will a public asset be sold off in a fire sale at a time of economic downturn, QR freight is in a pretty shabby state for any potential buyer to cast an eye over. Privatized or not; there needs to be a restructure so as to bring a full benefit of services to all Queenslanders. Improve the rail operation & decrease the amount of trucks traveling the same route as a railway track.
For those that don’t follow Still’s links, the story is: Having failed to provision enough engines, Queensland Rail is abandoning rural general freight, grain and livestock transport services in favor of moving coal. They’ll be tory electorates affected, so it doesn’t really matter does it?