The Age’s Editorial has penned a stringing rebuke of the NSW State Government’s privatisation of the Land Registry:
The government stands ready to sell to the highest bidder a highly profitable public asset that performs a vital, efficient and reliable service. The rationale it has provided to date is that the private sector is better placed to invest in technology and deliver faster processing times, new services and a better experience for business customers.
But what about the risks? Land and Property Information records who owns what and how land is divided up. It issues the certificate of title for each piece of real estate sold in the state, underpinning $130 billion worth of transactions every year. Everyone in the state who buys, sells or owns real estate relies on its integrity. It works so well that other countries including Vietnam, Thailand and Russia have modelled their systems on it. It is a reliable monopoly that contributes $190 million a year to the state’s coffers, of which nearly 70 per cent – $130 million – is profit.
To privatise an asset of such importance and calibre, you need not just a watertight case but an unimpeachable, transparent process. There is a perception that there has been some unnecessary haste to the transaction. The government has refused to release the scoping study, finalised in 2015, including the business case and cost-benefit analysis. It could announce as soon as this week which of the four bidders has won the right to operate the LPI for the next 35 years. When that happens the public will be none the wiser as to the actual value of the asset that has been sold on their behalf, nor whether the money raised – earmarked for an upgrade of ANZ Stadium and rebuilding Parramatta Stadium – justified the sale. There seems little doubt that a smoothly functioning land titles registry is of more benefit to more people than a couple of football grounds…
A prudent and fully transparent process would see the government, led by Premier Gladys Berejiklian, allow more time for the concerns above to be addressed.
To do otherwise is to risk a permanent and ongoing stain on its record for responsible management of the state’s finances.
Last month, Australia’s best investigative journalist, Michael West, also penned a stinging rebuke of the sale on his site, warning that it totally defies logic and opens up a whole can of risks:
Almost inexplicably, the NSW government continues to pursue its plan to privatise the state’s land titles registry.
We say “almost” because this deal is explicable only in that it will raise a projected $1 billion to $2 billion. It is a one-off transaction to finance the upgrade of two football stadiums.
It utterly defies logic.
Privatising a government monopoly, an essential service with zero competition, defies logic full-stop. In this case: besides the loss of jobs, besides the loss of a reliable $130 million a year dropping into state coffers, besides the loss of security over critical information – perhaps to an offshore private equity group – and besides the spectre of rising litigation costs, there is the matter of tax.
It is reasonable that voters demand of their elected officials to know where their assets may end up and who might own them. Will the profits of the NSW Land & Property Information Office (LPI) end up in a tax haven in an entity controlled by a financier of weapons? The notorious Carlyle Group is one touted bidder…
The secrecy shrouding the auction of the LPI means the actual corporate entities lurking behind each bidding syndicate remain a mystery…
Margaret Hole, a former president of the NSW Law Society, has previously raised several important issues with this sale, namely:
- The land registry is a natural monopoly and critical infrastructure upon which the security of business and commerce are based.
- There has been no independent assessment of the sale, and whether the expected sale price is suitable compensation for forgoing the annual revenue.
- The successful operator is likely to require home buyers to pay title insurance, as occurs in the US, and thereby gouge users. Title insurance on the purchase of a $1.4m property is currently about $990. Last year 213,000 land transfers were lodged in NSW, which means that conservatively $210 million in insurance premiums can be raised by the operators holding the concession, or tens-of-billions of dollars over the 35-year term of the lease.
- NSW home buyers will bear the cost of this impost.
- Similar privatisation proposals have been rejected in a number of other jurisdictions around the world.
The Public Service Association has also slammed the sale, noting:
- The State Government currently guarantees that the registered owners recorded in the NSW land titles system are the true owners of their land.
- The State Guarantee is backed by Torrens Assurance Fund and provides compensation for any loss suffered as a result of fraud or error in registration.
- If the service is privatised, the guarantee is lost and disputes over ownership of land or fraud are in the hands of a private company.
- Currently, the State Government Torrens Assurance Fund circumvents the need for land owners to self-insure and contributes to containing costs of land transactions within NSW. At the moment, this is a once-only payment that covers your interests in a property for the life of your ownership.
- If the State Government no longer guarantees titles, consumers may need to take out title insurance, in addition to their home and contents insurance, every year.
- This could mean a hike in price for all of us, or a fall in standards because of cost-cutting measures.
In late 2014, the Productivity Commission’s (PC) released a report on the provision of public infrastructure, which explicitly warned that the Coalition’s financial incentives to the states to sell-off public assets (“asset recycling”) “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.
Since that time, we have witnessed the states flog-off essential infrastructure and other public assets without giving due regard to longer-term consequences, and without ensuring that adequate regulatory frameworks are put in place first.
This procession of dubious asset sales has gotten so bad that ACCC head and longtime supporter of privatisation, Rod Sims, recently called for a moratorium on further privatisations because of the damage that they are doing to consumers and the economy:
“I’ve been a very strong advocate of privatisation for probably 30 years. I believe it enhances economic efficiency [but] I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales, and I think it’s severely damaging our economy…
“It is increasing prices – let’s call it out… I want them to stop and think about the fact that when they’re privatising these things without effective regulation you are going to have increases in prices, and just think about the effects of that on the economy.
Stop and think. And don’t be surprised that your electorates think that privatisations increase prices. Of course they shouldn’t [increase prices] but the history tells you differently”.
The first rule of any asset privatisation should be that it boosts competition within the relevant market, and at a minimum does not lessen competition. But as Rod Sims has noted, most recent privatisations have broken this golden rule, placing achieving a heavy sale price (or fees) above the interests of users.
Australians deserve better than brain dead privatisations like the NSW Land Registry, which utterly defies both economics and common sense.
- Business lobby admits mass immigration suppresses wages - May 17, 2022
- Where’s the inflation panic surrounding Stage 3 tax cuts? - May 17, 2022
- Canada’s housing market braces for interest rate shock - May 17, 2022