NSW to sell its electricity assets to fund rail

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ScreenHunter_2848 Jun. 11 13.35

By Leith van Onselen

The New South Wales Government has announced a plan to sell-off half of its electricity distribution network for $20 billion to fund investment in a new rail crossing under the harbour. From The SMH:

A new rail crossing under the harbour and trains so frequent that no timetable is needed will lift the “heavy, wet blanket” of transport congestion weighing down Sydneysiders, Premier Mike Baird says.

The Coalition government is hoping the big ticket rail project – long mooted but never before funded – will be enough to counter public fears over electricity privatisation at the state election in March.

The partial electricity sale would fund the crossing…

Rather than selling-off the state’s electricity assets to fund the rail project, surely a smarter and more equitable solution would be to implement a broad-based land values tax on all properties in New South Wales?

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This way, the Government could capture some of the land-value uplift arising from this and every other urban infrastructure project, in effect making them self-funding.

Moreover, the Government would not be constrained needing to sell-off one asset before it can create another, as appears to be the case currently, resulting in vastly increased infrastructure investment. In effect, they could undertake as much infrastructure as they want, provided it actually increases the value of property and is partially captured through the tax system.

Finally, with a broad-based land tax in place, the New South Wales Government would be less inclined to block development, in a bid to save on infrastructure costs, resulting in more land being made available for housing, in addition to less land banking and vagrancy.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.