Local control still matters

THE potential privatisation of The Perth Mint is one of those odd propositions unlikely to fire up the emotions of many stakeholders.

Having a generally small-government mindset means I am predisposed to any move by the state to shift non-essential services off its books.

And the mint is definitely less essential service and more historical relic; in terms of state ownership, that is.

Nevertheless, the mint, as the country’s major gold processor, plays a big role in the state’s economy and having such a service here, with decisions made locally, seems important.

Western Australian governments have a poor record when it comes to maintaining local decision making at those unusual assets that have historically been state owned, or at least controlled.

A prime example is the former Rural & Industries Bank, now known as Bankwest, which was sold in the mid-1990s in a deal that gave the Bank of Scotland majority control but, with 49 per cent floated on the stock exchange, still left locals feeling like it was their bank.

Under the terms of the privatisation, the governance structures were meant to guarantee considerable WA control.

By the early 2000s, however, Bankwest was fully owned by HBOS, the outcome of a big UK merger between BoS and Halifax Bank.

It was the end of a major local banking presence, despite a brief effort to use the WA presence as a base for Australian expansion.

Before Bankwest was sold, the State Government Insurance Office – which traded as SGIO and was historically linked to providing workers compensation insurance to miners on the Goldfields – was privatised in 1992 and listed.

By 1998, it was owned by national group NRMA. The loss of two businesses previously domiciled here was a blow to financial services decision making in this state.

But when governments seek to sell assets they want top dollar, and the price attained is rarely improved by throwing in too many restrictions around ownership.

A slightly less obvious example is Crown Perth. That entity started life in the 1980s as the Burswood Casino, a sweetheart deal in the WA Inc days that allowed the first major gambling venue in the state outside of a racetrack or Kalgoorlie’s two-up shed.

The Burswood Island Casino, as it was inaccurately branded, was owned by a company that was listed on what was then the Perth Stock Exchange.

The casino was supposed to be carefully encased in a very WA-centric governance structure but, as the recent royal commission exposed, decision making was largely taken out of local hands in 2004, when Publishing and Broadcasting, whose principal shareholder was Kerry Packer, acquired full control of the Burswood International Resort Casino.

All three of the assets above are in areas requiring specialist management and come with unique risks.

There are very good arguments against the state having to carry the can for the decisions of provincial leaders in otherwise global industries.

Those risks reside on state’s balance sheet and, even if they can be easily covered, they still end up costing us all in one way or another, even if it’s just the interest rate the state pays for providing that support.

And having state-centric entities, dominated by ownership of regulation at a local level, does create an environment for thinking skewed to domestic political situations.

In turn, the environment that creates is hardly conducive to breeding the brightest and the best in a sector. But we do lose something when control passes.

At the height of the GFC, numerous multinationals withdrew to their core business, discarding people and assets at the extremities.

Perth, as the most isolated capital city in the world, as we like to say, is certainly at the very distant fringe of many global sectors and many people here lost their jobs as a result.

The sale of Bankwest to Commonwealth Bank was a good example of that.

WA is a centre of the goldmining sector globally and, without doubt, the leader in Australia.

Having billions of dollars of gold traded through this town is important.

Any privatisation needs to be thought through such that the operations are retained, forever, not just beyond the next election or so.