Power sell-off: Neolibralism in NSW

John M. Legge, Dissent, Summer 2007-2008

NSW provides a couple of current examples of neoliberalism at work.

One is the push to privatise the NSW electricity supply industry and the other is to reconstruct the Royal North Shore Hospital under a public-private partnership agreement.

The current basis of the case for privatising the NSW people's electricity assets is the report by Curtin University energy economics professor, Anthony Owen. Owen argues that NSW will need a new base load electricity generating station in the next five to ten years (which it will, if greenhouse gas issues are ignored and nothing is done to encourage energy conservation) and the NSW Government 'can't afford' the $5 billion to $7 billion that such a station may cost.

The assertion is absolutely without foundation: the government-owned NSW electricity corporations could borrow anything they needed at the government's AAA credit rating and pay the interest and a dividend to the government as well. There is no need for this investment to even appear as a government budget expense, much less for it to get in the way of programs for schools, hospitals and public transport; the dividends would allow the government to spend more on these services.

The real agenda is almost wholly transparent: the government-owned stations set an effective cap on the wholesale price on the Australian east coast, preventing the owners of the privatised Victorian assets getting the returns that were expected when they were sold. Privatising the NSW system will make electricity on the Australian east coast more expensive, the supply less reliable and the whole operation far more profitable.

Instead of borrowing the money needed to rebuild the Royal North Shore Hospital or using the current budget surplus to pay for it the NSW Government will enter a public-private partnership, under which a private consortium will rebuild the hospital and provide all non-clinical services in return for an annual payment. While the details are likely to be buried in 'commercial confidentiality' we know that listed companies expect to earn at least 12 per cent on funds employed while taxation revenue requires no commercial return and government borrowing will not cost more than 7 per cent.

The project is described as a $703 million one: if this is the initial capital cost the difference between the public and the private cost of funds will approach $40 million per year. This is real current expenditure that really does affect the government's ability to provide schools, hospitals and public transport.

The people of NSW will get one hospital but they will pay for two and a half of them.

It isn't even voodoo economics: it is rape and pillage of the public purse.