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Independent research by leading Australian economist busts myths behind Baird’s power sale

Dec 8, 2014

New economic research has revealed that the sale of the NSW electricity network would see a loss of recurrent revenue and pose a long term risk to the State’s credit rating.

The release of the McKell Institute report, written by leading economist Stephen Koukoulas, has shattered the assumptions of Premier Mike Baird and fellow privatisation proponents, using hard data and empirical evidence to conclude that a sale is not in the best interest of the people of NSW.

The Stop the Sell Off campaign welcomed the release of the report as a step towards debating the merits of electricity network privatisation based on facts, rather than the myths and generalisations relied on by the Premier and his Treasurer.

Campaign director Adam Kerslake said it added to a range of expert information showing that a publicly owned electricity network made economic sense.

“In recent weeks we have seen the Federal Government’s energy regulator find that the highest power prices in Australia are in South Australia, where the network is privately owned, while the NSW Auditor General revealed that power employees have delivered $3 billion to consumers through increased efficiencies,” he said.

“Now we have detailed, data-driven research — produced by one of Australia’s leading economists — showing privatised electricity networks are less efficient, with overheads growing at a faster rate.

“His warning that the sale of the electricity network companies Ausgrid, Endeavour, and TransGrid would also pose a risk to the State’s credit rating, with income generating assets offloaded to fund infrastructure assets with recurrent liabilities, should also be a wake up call.”

The key findings of the report include that privatisation will likely lead to higher prices for consumers, due to higher overheads in comparable privatised businesses, and that the asset recycling plan offers little budgetary gain in the short term and risks negative impacts over the longer term.

Mr Kerslake said the analysis had also revealed that the physical size of different networks — essentially the distance covered by the poles and wires — was the largest factor behind differences in network costs, with publicly owned networks outperforming private operators.

“The report is scathing for Premier Mike Baird and his Liberal and National colleagues,” Mr Kerslake said.

“Mr Koukoulas has provided the hard numbers that blow apart the myths and generalisations used to promote what is essentially a fire sale to build an electoral war chest.”