JOHN MENADUE. Privatisation and the hobbling of Newcastle Port.

Oct 14, 2016


The downsides of privatisation are becoming clearer.

A recent example, which has received little publicity in the mainstream media is the hobbling of Newcastle Port for the benefit of Port Botany.

In this blog on 5 September 2016 ‘JOHN AUSTEN. How port privatisation will hobble Newcastle’ John Austen pointed out that in the sales of Port Botany (2013) and Newcastle Port (2014), the NSW Government hobbled the development of Newcastle Port and the Hunter Region.

In this privatisation deal:

  • The NSW government will compensate Port Botany for competition from Newcastle Port. These compensation funds will be paid by Newcastle Port.
  • Newcastle Port will pay around $100 to the NSW government for each container in excess of an annual cap of 30,000 containers.
  • This cap will increase moderately each year. The $100 per container payment could also increase.
  • The NSW government will pay this income from Newcastle Port to the new owners of Port Botany for 47 years.
  • The efficient scale of operation for Newcastle would be well in excess of 30,000 containers. This means that Newcastle Port will have to pay Port Botany millions of dollars per annum.
  • Port Botany is effectively shielded from competition from Newcastle Port.

Newcastle Port has been regarded as a model of excellent port operations. With the decline in coal trade that is in prospect, Newcastle Port would obviously benefit, along with the Hunter region, from growing and diversified port operations, particularly in containers.

But not only is Newcastle Port hobbled, but the favouring of Port Botany will cause road and rail congestion in the Sydney area.

This privatisation deal should be renegotiated to ensure more competition and opportunities for Newcastle Port. Compensation may be necessary to satisfy Port Botany.

Unfortunately, what is happening to Newcastle Port, is part of a sorry story of privatisation by governments that reduce competition in order to secure better financial returns from the sale of assets. It is known as ‘fattening up the enterprise for sale’ with the government reducing competition in order to maximise the sale price.

Not surprisingly, the Chairman of the Australian Corporate and Consumer Commission, Rod Sims, has warned that ‘privatisation is costing consumers and damaging economic reform’. He added

‘Poorly regulated privatisations are driving up prices and have little to do with economic reform. … This situation is getting worse and as the main concern of governments with privatisation, is maximising proceeds from the sale … A sharp upper cut is needed. [Privatisation] is increasing prices. … Very bad reform implementation of privatisation has been a big part of the current backlash against any economic reform.’ 

And Conservative governments are pursuing more privatisation despite the clear public opinion to the contrary. Essential Research reported earlier this year that the public believed that the following industries would be better run by government – electricity, water, trains/buses/ferries, motor ways, community services, hospitals and health services, schools, universities, prisons and ports.

We are paying a very high price for past privatisations.

  • If Paul Keating hadn’t privatised the Commonwealth Bank of Australia we might have had a more competitive banking system.
  • If John Howard had not privatised the Telstra network, we would have had a NBN long ago and without the need for a new NBN company.
  • Hospitals, like Port Macquarie in NSW and Modbury in SA were privatised, but had to be handed back to state governments because of poor service and high costs.
  • The privatisation of Sydney airport gives the operator a preferred position in any second airport.
  • The NSW government sold Port Botany and Port Kembla to the same buyer. It made competition between the two ports impossible. John Mullen of Asciano has said that ‘In Sydney and Brisbane (ports) we have had rent increases of up to 400%’. Maersk lines, the world’s largest shipping container company, has drawn attention to the major recent increases in port charges and warned Victoria about making the same port privatisation mistakes that NSW and Qld have made.

Privatisation is carrying a lot of lead in its saddlebags. Privatisation sales designed to maximise government returns in the sale price have usually led to reduced competition which have crippled the economy and cost consumers a lot more.The hobbling of Newcastle Port and the damaging of the Hunter regions prospects is another sorry example. It needs to be unwound.

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