Patrick Hutch (The Sydney Morning Herald 27 July 2017) reports that Rod Sims, the head of the Australian Competition and Consumer Commission (ACCC), stating that the sale of public assets has harmed the Australian economy. Many voices have been saying the same for years. When someone in Rod Sim’s position says it, can there remain any room for doubt?

Selling public assets has created unregulated monopolies that hurt productivity and damage the economy, according to Australia’s consumer and competition tsar, who says he is on the verge of becoming a privatisation opponent.

In a blistering attack on decades of common government practice, Australian Competition and Consumer Commission chairman Rod Sims said the sale of ports and electricity infrastructure and the opening of vocational education to private companies had caused him and the public to lose faith in privatisation and deregulation.

ACCC chairman Rod Sims says privatisation is hurting productivity.  Photo: Vince Caligiuri

“I’ve been a very strong advocate of privatisation for probably 30 years; I believe it enhances economic efficiency,” Mr Sims told the Melbourne Economic Forum on Tuesday.

“I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales and I think it’s severely damaging our economy.”

Deregulating the electricity market and selling poles and wires in Queensland and NSW, meanwhile, had seen power prices almost double there over five years. Photo: Glenn Hunt

Mr Sims said privatising ports, including Port Botany and Port Kembla in NSW, which were privatised together, and the Port of Melbourne, which came with conditions restricting competition from other ports, were examples where monopolies had been created without suitable regulation to control how much they could then charge users.

“Of course you get these lovely headlines in the Financial Review saying ‘Gosh, what a successful sale, look at the multiple they achieved’,” Mr Sims said.

“Well of course they bloody well did: the owners factored in very large price rises because there’s no regulation on how they set the price of a monopoly. How dopey is that?”

Mr Sims, who recently launched legal action against Medibank Private alleging it concealed changes to health insurance policies to boost profits ahead of its privatisation, said billions of dollars had been wasted in the scandal-plagued vocational education sector since it was opened up to the private sector.

A deal to privatise the Port of Melbourne was struck in March with conditions that restricted competition from other ports.

Deregulating the electricity market and selling poles and wires in Queensland and NSW, meanwhile, had seen power prices almost double there over five years, he said.

“When you meet people in the street and they say ‘I don’t want privatisation because it boosts prices’ and you dismiss them … recent examples suggest they’re right,” he told the room of influential economic and policy experts.

“The excessive spend on electric poles and wires has damaged our productivity. The higher energy price we’re getting from some poor gas and electricity policies are damaging some of our productive sectors.”

Mr Sims said he was growing “exasperated” as governments including the Commonwealth became more explicit in trying to maximise proceeds from asset sales.

“I think a sharp uppercut is necessary and that’s why I’m saying: stop the privatisation,” he said.

Mr Sims also used the forum to continue a public stoush with opponents of a proposed “effects test”, saying they were relying on “bogus” arguments against the Harper review proposal to give the ACCC powers to block action that had the purpose or effect of substantially lessening competition.

The Productivity Commission last week joined the Business Council of Australia, the federal Labor opposition and the supermarket giants in opposing the so-called “effects test”, which is a pet policy of National Party MPs including Deputy Prime Minister Barnaby Joyce.

by Jim Hayes

Australian Bureau of Statistics (ABS) information shows that total household wealth stood at a record $9.6 trillion at the end of March, which is 2.4 percent higher in one quarter.

This is somewhat misleading however. It does not mean that the wealth of the average Australian household is rising.

Household wealth is based on total of assets, including business assets and liabilities in the economy and then divided by the number of households. This very different from measuring income, which is a much better indication of standard of living.

Secondly, the liability of one is an asset of another, which means that there is a measure of double counting.

Nor does the household wealth measure consider the distribution of this wealth. Rather than the average household becoming wealthier, it could be that some do and others become poorer.

If an increase has been reported at the same time as the nation’s Gross Domestic Product (GDP) has experienced negligible growth, it must be that much of it represents the shift of wealth from some households to others and that the measure is inaccurate. After all, new wealth must come from somewhere.

This is exactly what has happened. GDP for the quarter grew by just 0.3 percent. Match this with the  reported 2.4 percent rise in average household income and it just doesn’t add up.

Another truth is that nominal household income has been sewed upwards by the real estate bubble. It is questionable whether this is real wealth when it comes to the household’s residential address, given that the cost of a transfer from one dwelling to another would cancel out the gain on the average.

Household wealth should be based on real, rather than nominal wealth and this means discounting inflationary growth.

The biggest growth has been in shares. These are now worth a record $826 billion, due to a rise by just over $36 billion for the quarter. Superannuation funds growth account for $29.9 billion of this. Although these numbers are used to add up assets it represents a transfer of assets, from one form to another and are not the creation of any new wealth. It is about distribution not accumulation.

Welfare groups have said that the ABS information highlights the growing disparity between rich and poor across Australia. They are right.

There is a transfer away from disposable income to shares.

Consumption expenditure almost kept constant, rising only by 0.1 percent. Savings decreased by 0.4 percent, suggesting that  expenditure other than for consumption was funded at the cost of savings.

It no longer looks like average households are improving their position.

Chief executive of the Australian Council of Social Service (ACOSS) said that nearly 3 million people still living below the poverty line.

“The reality is that people in the bottom 50 per cent of the community own just 6 per cent of the overall nation’s wealth,” she said.

“This is a story about, well, how are we making sure that the benefits of the overall wealth in the country are being shared more fairly.”

The inescapable conclusion is that one should not take official statistics at face value. There is usually more to the story than we are often told. Most people have not acquired the skills to properly interprete statistics and can therefore easily be misled by false conclusions.

In this case, a misinterpretation of what is really going on at the average household level, hides the truth and therefore detracts from what needs to be done to overcome the real problems faced by many. This needs to be corrected.