Why does the public sector need to compete with business?
I HAVE never understood why government provides services when the private sector can do so more than adequately.
I get even more irritated when the public sector actively competes against business in thriving areas of the economy.
There are numerous examples of this but a good one is Australia Post. Due to the ridiculous charter it operates under to maintain low postal costs while attempting to be self-financing, the good old-fashioned post office now competes against a whole range of private sector businesses, such as couriers and newsagents.
Whether or not Australia Post’s mandate to provide cheap letters is appropriate is a big question, in my view. But hiding the cost of that postal subsidy in a quasi-government entity is wrong and lacks the transparency we expect in our democracy.
Another example is the ABC. While you could argue the merits of an independent government-owned media till the cows come home, the concept of the ABC Shop is just plain wrong. I admit to using the retail outlets occasionally, as I do post offices, but there is really no necessity for the government to be competing against retailers such as bookstores and JB Hi Fi.
Here in Western Australia we seem to have had governments that, at least in part, understand that.
For all its faults, the past Labor government did achieve something in this area.
While the disaggregation of the previous monopoly utility Western Power fell short of the outright privatisation I would advocate, the concept of ring-fencing the generation assets as Verve Energy and restricting their growth was an appropriate signal to the private sector that they could invest in power without the threat of state competition. Verve was, in effect, a backup, and that is an appropriate position for the government to take.
Labor also privatised vehicle examinations, allowing certified private sector operators to conduct checks previously handled by Department of Planning and Infrastructure. This should have been done decades earlier.
Under the current state government there has also been change. I was pleasantly surprised to see restructuring plans for the Forest Products Commission, following which it will most likely exit the fee-for-service and share-farming business. These areas include planting trees for carbon offsets and growing trees on farms for the purposes of harvesting, both sectors with strong private sector involvement – notably with former Liberal politicians like Ian Campbell and Matt Birney involved.
The conundrum of what to do with government superannuation fund administrator GESB is a little more difficult to resolve.
While I am in favour of privatising government superannuation administration, I would challenge the way it was done.
For the past two years, GESB has spent a fortune on marketing its brand and developing a financial planning team in preparation for competition in the real world.
This was way too artificial. I understand the objective was to create a Perth-based financial services provider that could stand on its own two feet, but there are huge question marks about what this has cost the public and whether it is sustainable once it is set free from the state teat.
And let’s remember, WA already has financial service providers here. Superannuation fund manager Westscheme and insurance players such as the RAC and HBF are obvious candidates, not to mention armies of financial advisers who run competitive businesses, no matter what the industry funds sector might claim.
The big tragedy is how much money and energy has been expended on the complex process of getting GESB to this point, rather than simply contracting out the funds management to a more than competent private sector in the first place.
While GESB is a mess that the Barnett government has inherited, there is another bigger problem that it has got to deal with – the future of Perth’s ports.
For eight years the James Point private consortium’s plans for a port at Kwinana were stalled by a Labor government seemingly as opposed to its main backer, Len Buckeridge, as much as to the concept of such facilities being owned by anyone other than the state.
While this ideology didn’t exactly transfer across to other areas of infrastructure, such as courts, it was at least expected from a left-leaning government.
The fact that this project has moved so slowly since the Barnett government came into power, though, is surprising.
The current government might argue that there has been some progress. For instance, in May, it tabled planning scheme amendments to facilitate the reclassification of a waterway reservation to an industrial zone.
But this had to happen anyway, given the enormous pressure already coming to bear on the existing Fremantle harbour – which has been undergoing controversial dredging to increase its capacity as part of $250 million plans for harbour deepening and berth upgrades in the Inner Harbour.
Kwinana was always going to be the location for Perth’s next generation of port growth; the only question is who does it – the state or the private sector?
Mr Buckeridge argues that he not only has the government’s assent on this matter in the form of a deal signed in the days of Richard Court’s premiership, he also has the money.
Despite government roadblocks, James Point has made sure it is ready to seize the moment. For instance, it is at the moment going to the market to find a port operator to be an operational partner in the business.
So why doesn’t the government let them get on with it?
In these times when the state is supposedly cash strapped, why on earth would you discourage a private operator from funding and building an important and much-needed piece of infrastructure?
What is the alternative – a government-run monopoly in the form of Fremantle Ports extending its control of metropolitan port operations? What does that achieve?
A free enterprise view has to be that business would be much better off if James Point came into the mix as an independent rival to Fremantle, creating some competitive tension in our ports – sooner rather than later. With Bunbury not far to the south, it provides the prospect of a proper market for a variety of ship loading facilities.
Premier Colin Barnett has made his views about governments controlling critical infrastructure well known. As leader he decided to take a financial position in the Oakajee port in the Mid West.
Whether or not that view extends to Kwinana is not known.
But I would argue that, when there is a private company willing to enter a market, the government should butt out. Beyond regulation in certain circumstances, it is just not needed.