David Irwin, a director of Pacific National, has issued a warning today that the $4 billion privatisation of the Australian Rail Track Corporation (ARTC), which controls access to the nation’s 8,500 kilometre standard gauge rail network, could increase the cost of access for above-rail operators and run counter to a push to shift freight from roads to trains. From The Australian:
While much of the freight industry would like to see more freight moved off the roads and on to rail “commercial ownership of the ARTC may not go hand-in-hand with that objective,’’ Mr Irwin told a committee for the economic development of Australia forum in Sydney yesterday.
“Wherever there is a commercial owner that is looking for commercial returns I suggest that for much of the traffic across the country the cost of access will go up, not down,’’ Mr Irwin said.
Irwin has highlighted one the the key problems of privatising natural monopolies, like rail networks. Without a proper regulatory environment being put in place (which inevitable lowers the sale price), such privatisations merely shift a public monopoly to a private monopoly, raising costs for end-users.
As argued by professor Stephen King last year:
The government gets more today because we will all be paying more tomorrow…
Privatisation without competition risks turning a public monopoly into a private monopoly. The owners may change but the public will get ripped off just the same.
Generally speaking, the first rule of any asset privatisation should, therefore, be that it boosts competition within the relevant market, and at a minimum does not lessen competition.
Unfortunately, the proposed sale of the ARTC may break this golden rule.
