The Risks of Privatised Monopolies - Protecting the NBN - Speech - House of Representatives

HOUSE OF REPRESENTATIVES, 19 NOVEMBER 2024

The creation of the National Broadband Network flowed out of the botched privatisation of Telstra under the Howard government. Telstra was privatised by the Howard government starting in 1997, selling off 49 per cent initially and then selling Telstra into minority public ownership in 2006. That meant, when the Rudd government came to office and called for tenders to build the National Broadband Network, Telstra, then under majority private ownership, produced an extraordinary document. Asked to show how it might build a national network serving 98 per cent of the population, Telstra turned in a desultory 12-page letter which wasn't compliant with the requirements at the time. That meant Telstra had to be removed from the request for proposals process, and then the National Broadband Network flowed. We can only imagine how much more straightforward the process of building the National Broadband Network would have been if Telstra had worked constructively with the government in 2008, but it was not possible, largely because of the decision that the Howard government had made to privatise Telstra.

This bill matters to Australians because by keeping the NBN in full government control we ensure ongoing regulatory oversight of NBN wholesale pricing, keeping broadband affordable for Australians. It's also important because the NBN is crucial national infrastructure. There are cybersecurity and national security imperatives that require strong government oversight and which are best ensured by ongoing government ownership. Any future sale of the National Broadband Network would be likely to involve foreign ownership, raising serious national security and sovereignty risks.

Those opposite have argued in their talking points that the bill is unnecessary because no future government would possibly privatise the NBN. That flies in the face of the way in which the coalition has behaved in the past. The sale of Telstra deprived the government of leverage to roll out fibre broadband, leading to the National Broadband Network. The botched privatisation of Medibank Private by the then Abbott government in 2014 took away an important public owned competitor to hold private health insurers to account. That meant we saw the largest player in private health care move into private hands, taking away any ability of the government to better hold that sector in check. Medibank Private as Australia's largest private health insurer then operated very much as you would expect an oligopoly player to operate.

We saw under the coalition government an NBN Co submission to increase wholesale prices on their core products by three per cent over the CPI. The aim of that was clearly to bolster their income streams in preparation for sale. That move was rejected by Labor. It was rejected by the Australian Competition and Consumer Commission. Labor recognised the risk of the measure which the coalition was putting in place, clearly readying NBN Co for a potential sell-off.

We've seen a range of prominent economists say their views on privatisation have shifted because of a series of botched privatisations. In 2016 ACCC chair Rod Sims said he had been a strong advocate of privatisation for 30 years because he believed it produced enhanced economic efficiency. But he said he had now shifted his views and was, as he said, 'almost at the point of opposing privatisation' because the sales of assets had not been done in the long-term interests of taxpayers. Mr Sims pointed particularly to the sale of the Port of Newcastle and the bundled sale of the ports of Botany and Kembla, clearly done in order to maximise the sale price rather than to maximise long-term competition.

Another former chair of the ACCC, Allan Fels, said of privatisation, 'Everyone was only interested in revenue.' As he pointed out, the Sydney Airport Corporation was privatised with first rights to bid for a second airport in Sydney. That effectively led to adverse outcomes for consumers.

We've seen the current ACCC chair, Gina Cass-Gottlieb, pointing out the dangers of privatisation, again using the example of the ports industry. In a speech a couple of years ago, Gina Cass-Gottlieb said, 'Australia's container ports are regional monopolies, and, in the absence of appropriate regulation, they can extract monopoly rents from users with no alternatives.' Ms Cass-Gottlieb pointed to Port of Melbourne, which was privatised in 2017, and noted:

… the Essential Services Commission of Victoria was tasked with monitoring pricing. In two separate reviews in 2020 and 2021, the Essential Services Commission found that Port of Melbourne had exercised market power in setting land rents and engaged in significant and sustained non-compliance with the state's Pricing Order.

So successive chairs of the ACCC have pointed out the risk of botched privatisations of the kind that coalition governments seem to favour so much.

John Quiggin, an economist at the University of Queensland, has pointed to a number of international examples of botched privatisation: the British government's privatisation of the rail network, partially reversed with the renationalisation of Railtrack under the Blair Labour government; the sale of council homes under Margaret Thatcher, which led to a massive rundown in British social housing; and the privatisation of Thames Water, privatised under Prime Minister Thatcher and stripped bare by its private owners. As Professor Quiggin puts it:

The simplest explanation is that politicians saw privatisation and private infrastructure as a way to get access to a big bucket of money, which could be spent on popular projects without the need to raise taxes. This was a fallacy, refuted many times over, but resurrected just as often in zombie form.

One of the worst privatisations that history has seen is the sell-off of Chicago's parking meters for $1.1 billion over 75 years. Just 15 years after the sale, the owners had fully recouped their investment plus $500 million and still had 60 years left on the deal. Chicago was left with a situation in which it was paying compensation costs to the new private owners. Every time there were parades or street maintenance, or bike lanes or outdoor seating were put in, the private owners would need to be paid out. It's yet another example in which privatisation has not delivered for citizens.

As Clayton Barr noted in a speech to the New South Wales parliament, the privatisation of the Port of Newcastle was said to have been done by the New South Wales Liberal government with no restriction on shipping container terminals. That was shown to be a complete fabrication. He notes the privatisation of the Land Titles Office, in which the then Liberal government promised that employees would be offered a four-year protection for their employment. Twelve months after that sale, 30 per cent of the workforce was gone—a decision which, according to Mr Barr, cost New South Wales Treasury books more than $100 million each year. He pointed, too, to the New South Wales privatisation of Ausgrid, for which multiyear protections were said to have been put in place for workers, but in fact the new privatised owners stripped out the profits, sacked the workforce and allowed reliability to decline. Ausgrid workers were left jobless, and the state, according to Mr Barr, ended up losing close to $2 billion every single year.

The continued failure of Liberals to understand the way in which privatisation can operate against the interests of consumers comes down to their overriding faith in the power of free markets to always do better than the government. Yes, there are certain instances in which privatisations can produce efficiencies, but that judgment needs to be made on a case-by-case basis—based on evidence, not on blind ideology.

The privatisation of monopoly assets without appropriate regulation has in many cases been disastrous for Australian taxpayers. It has seen Liberal governments place short-term windfall gains ahead of the long-term interests of Australians. The range of privatisations that we've seen under Liberal governments have returned billions of dollars into government coffers in the short term but at the cost of tens of billions of dollars to consumers in the long term.

A botched privatisation of a monopoly asset is effectively to put a tax on future taxpayers, who miss out on the benefits that flow from competition. In the case of NBN, it is difficult to see how you would privatise it and have an appropriate system of regulation which would constrain a newly privatised monopoly of that kind. It would then potentially go on to extract monopoly rents from users in the same way in which we have seen it happen in the case of ports, in the case of electricity grids and in the case of parking metres.

Without appropriate competition, these privatised monopoly assets behave in just the way our economic textbooks would lead us to believe. So it is important that the House pass this bill, because Australia for decades has seen too many examples in which Liberal governments have failed to apply sound economic analysis to privatisation decisions. We know that those opposite are often too hasty in their blind love of markets and too slow to think about the issues of competition which need to be taken into account in any privatisation.

A greater role for the Australian Competition and Consumer Commission in considering privatisation decisions may well be warranted in the future, to provide a check on any conservative state or territory government that might look to privatise a public monopoly asset in a way which is against the interests of consumers.

We've seen another example in the case PEXA, an e-conveyancing monopoly which was privatised by state and territory governments. It garnered significant revenue in the short term but at the cost of higher e-conveyancing fees in the long-term. The interoperability reforms which would allow e-conveyancing to be a competitive market have the full support of the Albanese government and are something which state and territory governments should prioritise in order that people buying a home get a better deal.

In conclusion, since this is the last sittings block of the parliamentary year, can I acknowledge my staff who have worked with me over the course of the year, Georgia Thompson, Bria Larkspur, Isha Singhal, Angella Fernando, Kal Slater, Iris Eagar, Toby Halligan, Meg Thomas, Frances Kitt, Tori Barker, Maria Neill, Felicity Wilkins, Louise Negline, Bronwyn Asquith, Ashish Nair, and Nick Terrell; my departmental liaison officers, who have served variously in my office through the year, Brooke Gay, Lizzie McAnulty, Joshua Lovett, Hailey Ward, Vijay Murik; and my volunteers, Lilli Stawyskyj and Geoff Robertson, for their help.

Each of us in this place benefits from our parties, for those of us who are fortunate to represent major parties. For me, it's Australia's oldest and greatest political party, the Labor Party, and I do want to acknowledge the extraordinary team of volunteers who have helped me throughout the course of the year, and whose help I hope I can count on in next year's election.

Finally, I also want to thank my wonderful family for the huge support that I get from them. I'm looking forward to spending more time with you over the Christmas break, and apologies in advance for the days out on the hustings in next year's election.

ENDS


Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.