There were plenty of nonexistent links discussed in last night’s 4 Corners program on Sydney’s public transport woes – key amongst them train links to Sydney’s growing outer suburbs. And the NSW Labor government comes out of it looking pretty incompetent. But Wendy Carlisle’s report rested, in large part, on what seems a fairly insubstantial logical link – that the failure of electricity privatization was responsible for the lack of money available to extend Sydney’s rail network. But the actual connection between these two items is not at all clear to me. In political terms – sure. But in policy terms?
As I understand it, while government owned, NSW’s generators sell into the national electricity market for the best price that they can get, and make a profit doing so. By contrast, no public transport system in Australia makes a profit – they require ongoing subsidies from state governments because ticket sales don’t cover costs. So, from a purely financial perspective, selling the generators and using it to build a train networks is selling a profitable business and investing in a loss-making one. That’s hardly a sustainable basis for looking after the financial needs of NSW!
Now, there are of course a lot of other factors potentially at play here. One is that private investors might be prepared to pay more for the generation assets than what the government currently makes on them – in which case selling the generation assets makes (financial) sense, even if the money was just plonked in an index fund. Or that borrowing $10 billion on the rail network would have decreased NSW’s credit rating to such a point that the cost of borrowing might have risen too high. Or the Loans Council wouldn’t have permitted NSW to borrow the money – was that really likely.
In any case, the supposed connection between power privatization and fixing transport deserved at least a cursory examination, given the time spent on the entrails of the Labor Party organization’s attempt to impose its views on Labor Party candidates. While it’s reasonable to ask whether the privatization was the right decision, the notion that it’s somehow improper for the membership of a party to have a strong say in policy seems pretty odd to me.
I agree that the link is tenuous…other than that they DO need to fix the public transport woes of the State.
Wendy C would have been closer to the mark to point out that the State Government needs a huge amount of money for upcoming replacement and/or upgrading of the generation capacity of NSW.
That replacement (of old coal fired stations particularly) or lack of it is a strategic issue for the State.
Mind you, NOT making a decision about them has at least limited the upside of CO2 emissions – those graphs showing inexorable growth in power demand mean zip if there is no corresponding increase in generating capacity.
Just as with the lack of investment in water supply assets in southern states has led to water rationing and contributed to that industry’s lowering of GG emission in absolute terms, the lack of investment in power assets will probably lead to rationing of power in south east Australia. Something all the talkfests proposed in Copenhagen and done in Kyoto have not managed so far. Perhaps this is all a fiendish plot by the ALP in NSW to force a lowering of GG emissions.
I too did not think that the program demonstrated a strong link between selling off the electricity assets and spending money on public transport. Though there was a good point made that the government would have received a lot more money for the assets a decade ago than they would now so in effect both have been losing money.
I don’t think it hurts to point out regularly that elected members of large political parties end up representing the people that get them preselected rather than the people who vote for them at elections.
And I was utterly astonished that someone would put up with a 3.5 hour commute, sometimes standing for long periods, every day.
Yeah I watched it too, and was kinda surprised that she was so critical of the NSW yet bought wholesale into this notion that the electricity privatisation was a vicious, power-hungry blow against good transport and for vested interests.
I noticed that she glided over the fact that the public was emphatically against the privatisation, and you could make a good case those voting against were pursuing the more democratic option.
This said, our system’s still buggered, the metro to Rozelle is the biggest boondoggle going. Sigh.
critical of the NSW Govt, that is.
And that’s the strange thing about the program. It spent time showing that the metro may not be a great idea, but didn’t bother explaining why Rees went for it.
“….but didn’t bother explaining why Rees went for it.”
I thought part of the program expalined that the metro would eventually be linked to a Sydney wide system? Ha ha …ha ha .Sigh.
Could it be to stave off some inner west seats going to the Greens? The expansion of the Iron Cove bridge is upsetting many voters in the same area.
And what of the development rights that will come with the rezoning of land around the metro stations? Mr Tripodi and Mr Obeid might be sought for clarification.
Electricity governance is such a fantastic political crucible.
The reasons for sale have nothing to do with public transport and everything to do with the file in the bottom draw of the head of Treasury’s filing cabinet that gets pulled out every time there’s a new minister.
Regulation over ownership is the formal debate that’s relevant here, and according to Bob Carr, the regulationists won it in the 1950s. I suspect he’s right for the reasons Mark argued in his excellent ‘futility of arguing about Hayek’ post. I’ve got a longer post brewing that addresses Guy Rundle’s hopes for social democratic electricity governance – the punchline of his series on the left.
You’re right though, Robert (and great post, btw) The program should’ve picked one to focus on: electricity governance or urban planning and transport governance
Keith Orchison, who lives out in Castle Hill – one of the suburbs mentioned in the report – has an incisive post on the ongoing politics of the sale http://bit.ly/EvGY4
You hit on the exact point I was making to my partner, about that show, Robert – the complete lack of a “logical link”. If a sound case was put before the Federal government rail infrastructure could surely be organised, for where it is really needed, with their appropriate backing.
It would be a sensible big ticket project for our most important business centre. The long term benefits of the place running efficiently would surely pay for itself. And I say this as a Victorian camping out.
It is just a matter of getting over this fear of spending anything that might cause some loony ratings agency to cut a governments loan status. Sadly these party poopers still have the whip handle and regard the only reform that matters as the selloff of public assets. Time to tell that mob and there pushers to F.O. because true public governance has other priorities than just keeping them happy.
I don’t understand the ABC at all much lately,in fact,it seems to deny it is paid by the Taxpayer upfront! What maybe unconvincing for the ALP that it is on a continuous loser in its rail options and Financial priorities,is that technological advantage in cost reduction for new rail could be brought about by the now existing electrification.Sadly Merkel and others,who are technically minded have to defer to the arguments about financing,rather than their academic and expertise in matters technical.If the ALP is sure its plans about rail aren’t robbing the taxpayer,why dont they open up their minds to other forms of co-financing,including Government Bonds,Academic industrialisation to train students in business structures and running enterprises,and Internationalising staff transfer.For example,how many depressed Indonesians and Indian train drivers exist right now as a result of recent natural disasters.I do not at all mean lowering standards and pay for train drivers etc. but, you know,Australian rail staff,might well decide humane exchange of labor in troubled times is good global citizenry.To come to that conclusion would be to be powerful workers citizens and to protect the lives of others in deep distress.Working rail in N.S.W. maybe, a holiday for grieving or disturbed skilled workers from overseas.As it maybe the same for rail staff generally in N.S.W.
Joe2, I agree, though I would note that completely ignoring what the ratings agencies have to say wouldn’t be great public policy either.
Whether we like it or not, they do rather influence the rate at which both governments and private citizens can borrow money. And they are trying to judge – very imperfectly, admittedly – the probability that governments won’t pay back their debts. Not paying sovereign debt has nasty consequences down the track.
So if a state government’s credit rating started to decline rapidly, it’d be worth at least considering whether they are acting prudently.
There are two words you will never hear the ABC mention when there’re critiquing the long term structural problems of NSW. Those two words are Howard and Costello.
As one who is camping out, it just seemed to be an odd, disjointed program that didn’t really make any serious analysis in any of the several topics it tried to cover in the 45-50 minutes. A good program worth the effort of producing could have been done on the issue of urban sprawl, public transport (particularly how funding magically seems to dry up whenever a new railway line is needed), electricity ownership in NSW, politics in NSW (if the ALP are an incompetent government, how hopeless must the opposition be?), the role of party membership in setting government policies, etcetera. Instead we get a mish mash of everything which can only be done by skimming over the details.
On the electricity debate, it just seemed odd the way that the reporter presented it as A Good Thing, as though selling off the electricity system was a natural thing that wasn’t worth debating about. If it wasn’t for the Liberals telling me that they’re all commies, then I’d have thought that the ABC had joined the Chicago School.
Wendy missed a major point – Iemma had a ridiculous NW Metro at $14 odd billion in his shopping basket, a twisted outcome of Premier’s and Treasury maneuvering that had been condemned by all thinking people. Moreover there were profound institutional ructions going on reminiscent of the first split in the ALP, in the early 1890s – one could say, twas always so
Could it just be that the current crop of RWDB neo-Liberals on the ABC Board decided it was time 4 Corners took a swipe at NSW Labor (which, btw, certainly deserves it) and used it as a vehicle to push a neo-liberal pro-privatisation barrow (no doubt under instructions from the Liberal Party). Or don’t they have that kind of frightening power over programming. may the reporters just do what their bosses expect. (even allowing for the fact that somebody has whispered in Malcolm’s little pink shell ear (like JWH?) and he’s decided he can’t stand Kerry O’Brien.
One thing is for sure, the privatisation of NSW electricity will begin the day the Libs win the state elecvtion. And then we’ll really be in a mess, since electricity prices are already out of control.
I don’t think that any conversation about the woes of the Cityrail network today can be undertaken without looking at the history of the Eastern Suburbs line. Not that this line is particularly important to the network, but that the mess that surrounded its history, and the seemingly endless process to create such a tiny truncated line indicates there are problems that go far far deeper than the current factional disputes and spread over both parties over time. AS harmful as factioanl disputes and Costa’s desire to make enemies has been, it’s not like the system suddenly went south in the late 90s after projects like the airport link were brilliantly conceived and contracted.
AS for the metro, I think beyond the desire to get away from the rail unions and all that, the system is conceived solely on the basis that they could start building it. This is reliant on the idea that when you break the ground on a public work, it can’t be stopped, because your opponents won’t want to be held responsible for blocking a half finished project, but when built it has your name on it. This was long used successfully in New York, but I think the Eastern Suburbs line showcases its limited use in NSW.
I have to say, with no real knowledge of NSW power egneration, that the world certainly didn’t end when Kennett sold Victoria’s assets. Mind you, I think we got very very lucky to sell them at what would have been seen in hindsight as a peak market. There was quite a large amount of capital locked up in there, and we did have a lot of debt that we paid off. Not his worst decision by a long shot.
Mind you, my understanding is that they corporatised the SEC prior to sale, and that is where all of the efficiency gains were made, not with the sales themselves. The SEC was pretty hopeless, bloated and union dominated.
Paul, electricity prices and state ownership of generators are not particularly strongly connected.
“The SEC was pretty hopeless, bloated and union dominated.”
“..electricity prices and state ownership of generators are not particularly strongly connected.”
Both pretty contentious statements that fit nicely into the spin choir in support of privatisation of important public assets. I wonder if any other stakeholders other than bean counters have actually done any research on those alleged advantages that we here so much of. The full catastrophe of those mad selloffs by Jeff and others have not yet completely come home to roost but there are many telling signs already.
The main flaw in such a system is, what is good for the shareholders is not necessarily in the public interest. As an example, a power company might decide that it is not in its short term finacial interest (and probably likely to lead to lower executive bonuses) to properly service its infrastucture.
joe2: we’re not operating in a vacuum here. The NSW state-owned generators sell into the national grid and seek the best price for their power, as do various private power companies.
If you had a situation with state-owned generators, state owned distribution grid, and state-run retailers, that’s a different argument. But that’s not an option open to the NSW state government.
Robert,
What on earth makes you think the Libs won’t privatise ALL of NSW electricity? After all, they have form, eg Telstra.
Oh, indeed, Robert @19. We should all be heading back to total state control of critical energy services. That way we would not be held to ransom by delightful companies like TRUenergy who have no qualms whatsoever in planning for power blackouts if their every wish is not granted. They are a threat to our continued energy service and the planet because more carbon burnt equals more profits to them.
http://www.abc.net.au/news/stories/2009/07/12/2623385.htm
And Paul you are right. They will flog it off for sure. Just when other states will be forced to buy back necessary control.
I thought it was woeful.
While she has a point, did Wendy Carlisle really need to spend an entire hour moaning about how bad the public transport system is in Sydney.
It’s like yes, well Hello??
Tell me something I don’t know!
Talk about labouring a point. Gawd.
http://www.audit.nsw.gov.au/agrep02v2/costofolympicgames.pdf :
Yep. No way we could afford rail development without selling the silver. Damn those Olympics were a waste of money. For 20 years we’ll be paying the price, and this rail failure fiasco is one of the big ones. Poor Rio.
I can tell you that the Metro is losing more votes in the inner-west than it’s gaining.
Indeed mister z. All that money they pissed away on the Olympics (both the pre-award bribes and the post-award stadium building frenzy) would have paid for Sydney’s infrastructure shortfalls 10 times over.
Not that I really care. I wouldn’t live in Sydney if you paid me. I’d just be satisfied if Adelaide’s public transport was acceptable.
improving public transport I imagine would improve the conditions by which the state government could extract value from its other income streams (commercial, residential, etc activities) by increasng churn/mobility.
so rather than being a question of governance of a service as the income streams being compared, as robert and dk.au suggest, if the comparison is thought of as comparing to pieces of infrastructure, then maybe the situation changes?
i don’t know anything about this, but robert seemed unclear about any possible financial link and this one (comparing them as infrastructure rather than as service) seems obvious.
Four Corners didn’t pick privatisation as one of the narrative spines through this story for any old reason- certainly it had nothing to do with the Chicago school or some tired left/right debate about the ABC. We had one reason – and that was because Premier’s Carr and Iemma both cited privatisation as the mechanism by which future state infrastructure would be funded.
At any rate we’ve certainly stirred up a hornet’s nest here. Maybe that’s more to do with the ideologies of the contributors to Larvatus Prodeo . Did someone mentioned Victoria where the sky hasn’t fallen in yet or any of the other state’s that have done the same without disaster? By the way what’s profitable about having to spend maybe $15b on more power stations in a couple of years? I think Ross Gittens summed this debate up well when he observed there is not unlimited money to be borrowed by government’s – the electricity debate properly goes to the question: what justification do government’s have in running businesses that others could do better? Surely the pertinent questions about pricing are a matter of efficiently regulated markets?
In any case the program was an examination of a decade or more of failed plans by the state govt on public transport, and the human and economic consequences of that. An important public affairs component of this was the hidden war within government – politicians versus the unions – which contributed to the situation NSW faces.
One contributor said she was bored with an hour on Sydney’s public transport problems. If we erred perhaps it was in not making clear the cost of Sydney’s gridlock is higher prices for all.
What’s the ABC budget these days? Almost 900 mil? I look forward to the next programme on how many buses to Baulkham Hills that could buy us.
Wendy, thanks for taking the time to respond here.
I think there is an entirely arguable case that the state government should get out of the power business, myself, but there is a diversity of views on the issue here on LP. There was enough interesting material in the internal machinations of the NSW ALP and its associated unions to fill a program on its own. Or two, for that matter.
Similarly, the poor decisions on Sydney’s public transport could clearly fill a 4 Corners report entirely on its own. For instance, explaining why outer suburban links get killed in favour of an inner-suburban metro line in an already well-served area, as I understand it.
But I honestly felt that taking the claim, at face value, that the lack of electricity privatization explained the failure to build needed public transport infrastructure was rather an oversimplification and, incidentally, let the Carr government off the hook for a decade’s poor planning.
I think it interesting, Wendy@27, that you reflect on “the ideologies of the contributors to Larvatus Prodeo”- as if there was some agreed line that posters all follow religiously- and then seemlessly move onwards, to your own ‘truths of the matter’, as if they are are not driven by some cultivated theory.
What you said above sounds mighty like the words of a free marketeer, to me, which I think was reflected in The Four Corners episode you reported on. Still I quite enjoyed the show, even if another perspective to the ‘flog off the family silver at all costs mentality’ was not given a fair go. Cheers.