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Issue #1570      24 October 2012

Wholesale theft of public assets

The push is on for an all-out bargain basement sell-off of remaining public assets around Australia – state and federal. In a report released last week, Infrastructure Australia (IA), the federal government’s “independent” infrastructure adviser, identified $200 billion worth of “lazy assets” to be handed over to the corporate sector as private profit-making ventures. By “lazy”, IA means they are not in the hands of the corporate sector churning private profits.

Photo: Josephine Donnolley

The report goes to great lengths to dress up its proposals in a form that might make them more palatable to the public and the trade union movement. It suggests that the trade union-linked industry superannuation funds invest heavily in the privatisation of these assets. The sell-off is also presented as necessary to produce budget surpluses, cut public debt and raise funding for urgently required public infrastructure.

The public assets recommended for sale include the iconic Snowy Hydro scheme, power generators and other electricity assets, airports, ports, water utilities, public roads, rail and forestry assets.

Former ACTU assistant secretary Garry Weaven has come out strongly supporting IA’s privatisation program. Weaven is chair of Industry Funds Management, a global fund manager owned by a number of Australian superannuation (pension) funds.

Weaven played a major role in the establishment of the industry super funds in the 1980s and has since held senior positions in the financial and corporate sectors. He has also called for the immediate privatisation of Medibank Private, Australia Post and the submarine builder ASC, which were not on IA’s hit list.

If super funds invest in infrastructure, it should be on the development of new socially and environmentally sustainable infrastructure such as public housing and the development of alternative, renewable energy sources, not in existing public infrastructure which should remain publicly owned and managed.

IA identifies 83 profitable, publicly owned assets for sale within the next 12 months. The rest of its hit list might take longer, to first be put on a profitable footing or to make the necessary regulatory changes such as the pricing of privatised public roads, regulation of usage and negotiate government subsidies to guarantee profits.

Budget surpluses

The financial sector and their mates in the rating agencies demand governments produce budget surpluses and reduce public debt. They also demand that public assets and services be privatised.

The call for a budget surplus and public sector debt reduction has two purposes. Firstly, it acts as an excuse to push privatisation to raise money for cash-strapped governments. Secondly, the income that the banks get from debt reduction can be used to lend to the private sector when it borrows to purchase public assets that are being privatised.

Infrastructure shortages should and can be publicly funded, owned and managed. The money can be raised by such means as increasing corporate taxes (including a genuine super profits tax for all industries), slashing the $30 billion plus in military spending on war preparations, phasing out the $5 billion private health insurance subsidy for private hospitals and nationalising previously privatised public assets. There is huge potential to raise income from a public bank, public insurance office and public superannuation scheme for investment in public transport, housing, education, hospitals, etc.

Liberal and Labor governments alike are determined to privatise anything that can be used by the private sector to make profits and will continue to subsidise services that cannot make a profit when privatised. It will take a government of a new type, a left and progressive government that puts people first to change that situation.

Reasons not to sell

Financial Review columnist Alan Mitchell (18-10-2012), trotted out the usual neo-liberal capitalist myth: “There is no reason why these assets should remain in state hands if the new private owner can be regulated.”

In fact there is every reason they remain in public hands.

The evidence is in from the sale of highly profitable enterprises and services such as Telstra, the Commonwealth Bank, government insurance offices, electricity and other utilities. Without fail, the sale of public assets results in:

  • Higher charges to provide profits and pay the interest on loans raised to purchase the utility or enterprise
  • Governments losing billions of dollars of regular income from profitable public assets
  • Decline in quality, affordability and accessibility of services for people as the aim becomes maximisation of profits, not services for people
  • Sacking of workers, casualisation of employment
  • Lower wages and loss of hard won working conditions
  • Deunionisation
  • Lack of public accountability and secret contracts – “commercial in confidence” – even when huge public subsidies are paid.

Public more efficient

The Commonwealth Bank declared $7 billion post-tax profit last year. Under a progressive social charter, a publicly owned and run Commonwealth Bank or new public bank could provide better and cheaper services for people, small business and farmers. This would put pressure on other banks to compete. The public benefits would be enormous, and profits would flow to the public purse to fund social spending.

If Telstra had not been sold off and lost its monopoly over telecommunications services, the federal government would be reaping billions of dollars every year and at the same time services would be far cheaper and more efficient.

Overall telecoms services revenue passed the $40 billion mark in 2011 and Telstra alone declared a net profit of $3.4 billion for 2012. The wastage by the private sector in duplications of services and layers of management, office costs, etc, is enormous. So too are the layers of profits involved in contracting out and the use of franchises.

There is nothing efficient about one provider for the internet, another for the landline, and another again for the mobile phone, for example. Instead of three, four or five outlets in a big shopping centre there would be one. Capitalist “competition” pushes up prices as well as leading to lack of competition through monopolisation.

Public enterprises and government departments are selling off valuable real estate, either to be rented back from the new private owner at a very generous and profitable rate or to be handed over to developers to make a killing.

Australia Post has embarked upon a program of closing not so profitable or “loss-making” post offices, regardless of the social impact on local communities. Under competition policy – another arm of privatisation – cross-subsidisation is not allowed. Previously if a rural or regional post office made a loss, service obligation ensured that it was subsidised by other more profitable outlets in city centres. Service was paramount.

The sell-off of post office buildings to private investors means post offices now have huge rental bills to meet. These could be as high as $20,000 a month or more. As a result, a healthy profit could be turned into a deficit by the sale of real estate.

Public risk, private profit

As NSW Greens MP John Kaye pointed out in relation to the O’Farrell government’s bill to privatise Port Botany and Port Kembla, it “allows the Treasurer to keep the risks and liabilities in public hands while privatising all the profit-making aspects of the ports.”

The government not only subsidises unprofitable services such as tunnels or rail, but picks up the pieces when the private sector neglects maintenance, fails to make a guaranteed rate of profit or goes belly up.

There is only one reason why the likes of Alan Mitchell, Infrastructure Australia and neo-liberal governments promote the privatisation of public assets. It is for the benefit of the private sector, so they can make more profits.

In case there are any doubts about whose side the “independent” Infrastructure Australia is on, just take a look at its advisory council. The chairman is leading business figure, Sir Rod Eddington who is chairman of JPMorgan Australia, an arm of one of the world’s largest investment banks. His other business connections include Rio Tinto, Allco Finance and News Corporation. The other committee members have relationships with the IMF, Bankers Trust, Deutsche Bank, Minter Ellison lawyers and KPMG. Say no more!


Public assets belong to the people. They have been built up by working people to serve the community. Privatisation turns the principle of service to the people on its head. No government has the right to hand over the people’s assets and services to private corporations to bleed for private profit.

Privatisation is nothing short of criminal. It should be halted and reversed.

If so many public services and assets had not been privatised, state and federal governments would have no excuse to be privatising and cutting services today.

If they continue down this path, they will eventually bankrupt the public sector, and leave governments with few resources to govern.

Sovereign bankruptcy and collapse of government would open the way for the direct, open dictatorship of capital, for an end to any pretence of democratically elected government with powers to govern. It would see the complete privatisation of government.

The majority of Australians oppose privatisation. This opposition must be realised in action, in the broadest possible movement, including the trade union movement, against the sale of public assets and services.  

Next article – Editorial – The grubby saga of uranium sales to India

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