With the Western Australian finances in disarray following the “unexpected” slump in the iron ore price, which threatens to blow a $1.5 billion hole in the State Budget, the State Government has resorted to tried and true method of flogging-off the states’ assets.
As reported in Business Spectator today, the Western Australian Government plans to offload 20 assets in a bid to pay down the states’ crippling debt:
Assets listed include Fremantle Police Station, parts of the Police Headquarters in East Perth, the East Perth Power Station and land around the Cottesloe School for the Deaf, as well as parcels of land held by the Agriculture and Food Department and the Public Transport Authority.
Five hospital precincts will also be up for sale, including Princess Margaret, Swan Districts, Kaleeya, Woodside Maternity and Shenton Park…
Perth Market Authority, which operates Market City in Canning Vale, the Utah Point port handling facilities in Port Hedland and Kwinana Bulk Terminal south of Perth were announced earlier this month as the first assets up for sale.
Disposing of unused land assets makes sense, given it could be put to better use by the private sector, such as for residential or commercial purposes. Ditto the Shenton Park and Kaleeya hospitals, which are reportedly soon to be decommissioned, as well as the disused East Perth Power Station.
However, the efficacy of selling-off the Perth Market Authority, the Utah Point port handling facilities in Port Hedland, and the Kwinana Bulk Terminal, are less clear. Whether such privatisations will ultimately be beneficial to Western Australian taxpayers will depend on whether the upfront proceeds received from the asset sales outweigh the expected net present value of future profits. If not, then the sales are likely to be detrimental to long-term budget finances.
There are also efficiency issues that could arise from these sales, particularly given all three assets represent a form of natural monopoly, leaving open the prospect of price gouging by prospective purchasers.
