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Infrastructure spending doesn’t require asset sales: New research offers sustainable alternatives to sell off

Feb 6, 2015

New roads and public transport infrastructure can be built, an infrastructure fund created, and budget sustainability improved, all while retaining essential services in public hands, according to an options paper aimed at starting a genuine debate around alternatives to privatisation.

Produced by the Stop the Sell Off campaign, in consultation with industry experts, economists, academics, and electricity sector employees, the document outlines a range of options that could see power prices cut, efficiencies improved, infrastructure funded, and profitable government-owned assets retained in public hands.

“The way forward: public electricity, public infrastructure, public benefit”, seeks to start a genuine debate in the lead-up to the NSW election in March about the broad range of options available to fund much-needed infrastructure.

Stop the Sell Off campaign director Adam Kerslake said Mike Baird’s message to the public was that the only way to fund infrastructure was to sell assets, but that simply wasn’t true.

“This document is about identifying a whole range of options that are available to the NSW Government, offering alternatives to asset sales that not only still allow the funding of infrastructure, but strengthen the sustainability of the budget in the medium to long term,” Mr Kerslake said.

“The argument over privatisation isn’t black and white — asset sales aren’t the only way to fund infrastructure — and the options in this document provide a starting point for a genuine public debate.”

Produced with contributions from energy sector expert Dr Lynne Chester and leading economist Stephen Koukoulas, options in the document include:

  • legislating for 30 per cent of electricity network income to be dedicated to new infrastructure projects, delivering $3.56 billion over ten years;
  • capitalising on record low ten year government bond rates to fund priority infrastructure projects, with an actual cost on borrowing of just $51.2 million over ten years for every $1 billion borrowed;
  • creating a new infrastructure funding stream of up to $11.52 billion over ten years through the introduction of a portable Long Service Leave scheme for all NSW workers;
  • saving electricity consumers $1.4 billion over next ten years by delivering industry reforms and maintaining public ownership;
  • introducing protections for the most vulnerable in our community, such as the elderly and low income families, through strengthened consumer protections and hardship programs; and
  • operating the electricity network as a not-for-profit service, immediately reducing average power bills by $310 to $382 per year, depending on government priorities.

Mr Kerslake said the report wasn’t about advocating any single option, but aimed to highlight some of the many alternatives available to the NSW Government.

“There is absolutely no economic reason why infrastructure spending must be tied to the privatisation of the NSW electricity network,” he said.

“No one denies that NSW faces growing infrastructure demands, whether for new roads, public transport, hospitals or schools, but our argument has always been that selling off profitable public assets is a short term solution to that problem.

“Economic research has shown that in the medium to long term, the privatisation of income generating assets leaves government budgets worse off.

“Our research has identified just some of the key alternatives that could provide a sustainable source of infrastructure funding, while retaining an efficient electricity network in government hands where it can be run in the public interest.”

Mr Kerslake said the Queensland election had shown that the public was overwhelmingly opposed to asset sales.

“The public have experienced two decades of asset privatisation, and despite all the promises, each time it has led to reduced services, higher prices, and job losses — particularly in regional areas,” he said.

“It is time for the public to have a genuine discussion about the alternative funding options that exist.

“The Liberal and National Party’s attempt to blackmail voters into accepting unpopular asset sales, claiming it is the only way to fund new infrastructure, needs to be challenged.”

A recent poll of 2275 people in Victoria and South Australia, commissioned by the Stop the Sell Off campaign, revealed consumers were so unhappy with their privatised electricity networks that more than two-thirds would support a government buy back.

“Mike Baird claims that consumers in Victoria and South Australia are better off with privatised electricity networks, but when you ask the public in those states, they say the opposite,” Mr Kerslake said.

“In Victoria, 73 per cent of the population would support the network being returned to public ownership, while in South Australia 70.9 per cent want a buy back.”