Credit:Andrew Dyson
The highest bidders turned out to be companies putting together a vertically integrated business of power stations at the bottom and power retailers at the top. In some cases,governments tightened reliability standards in a way they knew would make it easier for potential purchasers to game the price regulation rules.
If you wonder why parking is so expensive at airports – and catching a taxi home comes with an extra fee – it’s because the Keating government privatised these geographic monopolies without price controls.
With the state governments’ privatisation of their ports,some private lessees have been allowed to fatten their profits in ways too diffuse for us to see how we’re being got at.
An appalling case in point
For scheming behaviour by premiers and treasurers,there’s no case more appalling than the way the NSW government privatised its ports of Botany,Port Kembla and Newcastle.
Botany is the state’s one big container port,with Port Kembla specialising in bulk commodities and Newcastle the biggest coal port in the world.
In 2013,Botany and Kembla were leased to a single operator and the sale price was enhanced by a “confidential” agreement that the state government would compensate the operator for each additional container handled by the Newcastle port beyond a minimal level.
The Newcastle port was leased to a separate operator with a confidential agreement requiring it to compensate the government – to the tune of about $100 a box,it’s said - for any money it has to pay the other operator if Newcastle increases its handling of containers.
Trouble is,five years on,this deal the public wasn’t supposed to know about is a classic “seemed like a good idea at the time”. Newcastle’s future as a coal port is all decline (the more so if the Adani mine in Queensland goes ahead),but it’s well placed to diversify by building a big new,state-of-the art container terminal. It has the land,it could build a single ship-rail-road interchange and its port is deep enough to take the next generation of much bigger container ships that will otherwise be accommodated by only one other Australian port,Brisbane. But the confidential deal makes a container port in Newcastle uneconomic.
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Meanwhile,routing all the state’s inward and outward container movements through Botany is a crazy idea. It’s a long way from the Moorebank intermodal terminal,meaning a huge amount of heavy trucks lumbering through Sydney.
New modelling by AlphaBeta economic consultants for the Port of Newcastle claims a new container terminal would allow businesses in the northern part of the state to divert about 16 per cent of the state’s two-way container traffic through Newcastle,cutting their freight distance by 40 per cent,putting competitive pressure on Botany’s container handling prices,taking many trucks off Sydney roads,boosting the NSW economy and cutting the freight costs hidden in the prices consumers pay.
On Monday the Australian Competition and Consumer Commission announced it was taking the Botany operator to court,alleging its agreement with the NSW government is anti-competitive and illegal.
Just another skirmish in what will be a long-running battle to undo the not-so-unintended consequences of privatisation.
Ross Gittins is theHerald’s economics editor.