Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 2 Contents 76 futurebuilding Volume 3 Number 2
Public Sector Reform Panel
evidence that there would be a commercial return,
which is the seven per cent internal rate of return
If you did that, you would be con dent that in
time, you could sell off the network. And you'd only
have a question of whether, in the hands of the new
owners, you would have a utility rate of return where
you would deregulate what they could earn.
My preference would have been a regulated
utility rate of return on the network once it was built.
So I've always found all the comments coming
from business about the need for a cost-bene t
analysis on the NBN to be curious.
Would a retailer prefer this analysis to an
internal rate of return when planning investments
in supermarkets? Using a cost-bene t analysis
technique would have just made it even easier to
justify the project and the spend, rather than the
more rigorous approach that was taken, which was a
proper assessment of the internal rate of return.
When the rst business plan was done, again
people in government insisted that it not be analysed
by colleagues in government because they didn't
necessarily have the commercial skills.
BL: It's an exceptionally good point. Almost all
the discussion about getting projects done in the
immediate term has focused on privatising assets
that already exist. How important is it that you avoid
experiences like the Yoy Lang move by the Cain
Government in the 1980s? When they ran out of
money to complete the power station, they privatised
a small part of it with no market context, and in fact
that part of the generator ended up being ring-fenced
out of the National Electricity Market for years to
come. Is there a risk we might see governments not
have a clear idea of the structures of things like water
markets, start to privatise parts of water utilities and
ultimately retard a longer-term competitive market in
whichever sector they are moving in?
KS: I think that in electricity, the sooner we get
into privatising everything and moving to NEM-
type structures properly, the better. The appropriate
structure for water is less clear, and different
jurisdictions are going in different directions.
Queensland seems to be reversing what it had rst
done, so appropriate structures in water need a bit of
attention. But we should keep an eye on what has
happened in both the United Kingdom and the long-
term franchising that the French do, and whether or
not that's more ef cient. It is really important.
TM: We have fallen out of the habit of
remembering what happened in Victoria when Alan
Stockdale was Treasurer.
We have also forgotten that the nature of the
industry structure he was responsible for, in respect
of the energy sector, was very innovative in the world
at the time. In fact, I would argue it's still serving
Victoria very well.
Alan Stockdale, the other ministers in the
government, and the of cials they worked with,
actually did Australia a service, because they didn't
just sell the whole system off, which is what happened
later with Telstra.
Instead, they broke it up and went for the
maximum level of competition.
Similarly, the franchising of public transport
systems is still a good model, and more of that could
be done around the country, because of the sheer
dif culty of selling lots of those types of assets.
We are at a point where there's huge scope for
creativity on how to do things, and the only caution I'd
enter is the Anna Bligh (former Queensland Premier)
caution. She lost of ce for a number of reasons. But
the thing that traumatised other politicians most
about her experience is that she came back from
an election and proceeded to privatise the assets,
without going to the people beforehand to say she
was going to do it.
In Victoria, if the government came out now
and said, 'we are going to privatise water,' I think
they'd have an Anna Bligh experience. I think any
GS: If you look at the National Competition
Policy reforms and at what the Kennett/Stockdale
Government did in Victoria, there are some really
The rst one was to say, 'Competition must apply
to every sector of the economy and to every business
operation, whether it's government-owned or not,
unless there's a good, independently assessed public
interest reason why it's not.'
The second was: 'Does government really need to
build this, and does government really need to
BL: What is the one thing you'd say to
governments about what they need to be doing over
the next couple of years to get these things moving?
GS: Reintroduce National Competition Policy
as a major reform issue as part of the COAG
Reform Council. We should adopt the same
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