Infrastructure Australia (IA) has called on state governments to privatise their public transport networks, which IA claims could save taxpayers $15.5 billion by 2040. From The AFR:
Handing operation of all of Australia’s public bus and rail systems over to the private sector could save state governments as much as $15.5 billion by 2040, giving them funds to reinvest back into public transport, a new report from Infrastructure Australia says.
Philip Davies, Infrastructure Australia’s chief executive, said Australia’s transport systems needed to continue expanding to keep up with population growth and governments could raise money for new transport services by franchising existing ones.
Demand for public transport is expected to rise 48 per cent in Sydney by 2031 and almost double in Melbourne and Perth.
Many bus services around the country are already operated by private companies, with the NSW government announcing last week it was putting another Sydney bus service up for private tender.
New public transport systems under construction, such as Sydney’s Metro and its CBD and south-east light network, are being franchised, which involves giving private companies control over the operation and maintenance while the government maintains ownership of the infrastructure.
Private operators may reduce costs by improving productivity with performance incentives and better asset management, as well as cutting jobs…
Rail networks, with the exception of Victoria which franchised its systems in 1999, are still in public hands. NSW could save almost $9 billion by franchising its rail networks and the remainder of its bus systems, while Queensland could save $3.3 billion and Victoria $1 billion, the report says.
The assumption that private operators will necessarily run the system more efficiently than public operators is heroic, as is the claim that privatising public transport will necessarily save taxpayers money.
Earlier this month, David Hayward – a professor of public policy at RMIT – penned a stinging critique of the Victorian Government’s privatisation experience, which Hayward claimed has not led to lower user charges or reduced government spending:
…the scale of the PPP commitment built up over the last decade is now a story in itself, although not one easily discovered.
Fully one-third of Victorian Government debt is now accounted for by borrowings entered into with private parties to build, own and operate public assets.
Even more remarkably, almost half of the Government’s interest bill is accounted for by private lease payments.
It sounds a bit like a magic pudding, except there are none in public finance…
These privatisations wouldn’t be so bad, of course, were it beyond dispute that they delivered value for money to end users and not just a nice return.Trouble is the Auditor-General keeps pointing to evidence that goes in the opposite direction.
From trains, trams, and buses to prisons and even electricity and gas, the one thing that is common is the lack of transparency in performance measures.
Also consistent is how well the private operators manage to game the measures, whether by skipping stations or stops or using pricing systems that are so obscure, no-one knows what they are buying, on what terms or for how long…
It is quite striking that in the case of Victoria — Australia’s most ardent privatiser over the last three decades — there is no evidence of user charges falling, or government spending abating.
This is what you’d expect were the privatisers to deliver the promised efficiency gains.
In the case of public transport we know that the state is now spending more today than was the case under inefficient public ownership.
The one difference is that these days the private owners of Victoria’s infrastructure tend to be overseas owned…
The metropolitan trains are run by a company from Hong Kong; the trams, a fifth of the metropolitan buses and the massive desalination plant by firms from France; and about 40 per cent of prisons by an American corrections company.
Profits from taxpayer payments are repatriated overseas in a nice little twist that sees privatisation down under contributing to globalisation on top…
We can expect the others to look to Victoria as a model, raising important policy questions about whether our governments are leaving an expensive legacy that someone else might one day have to fix.
Brilliantly said.
IA wants to pursue this approach because it believes it will allow state governments to deliver both lower taxes and reduced public debt simply by transferring the operation of public transport from public to private.
But as experience shows, the new private owners will almost always try to boost their profits by either forcing-up user costs or collecting ever-greater franchise payments from the state government. We have seen this time and time again with ports, airport parking, public transport, toll roads, and utilities. In many cases, the cost-of-living burden for users is worse than raising their taxes, with the added drawback that it is less transparent since private profits are easier to hide from public view.
In any event, if IA is so concerned about public transport and infrastructure failing to keep up with population growth, then why doesn’t it call on the federal government to slash its permanent migrant intake, which is the demand-driver causing the infrastructure bottlenecks and congestion in the first place?
It is because of the federal government’s mass immigration program that Australia’s population is projected to grow by an unsustainable 400,000 people every year – equivalent to adding a Canberra to Australia’s population – until mid-century:
With most of this population projected to flow to Sydney and Melbourne, whose populations are projected to balloon to around 8 million each.
What we certainly don’t need is short-sighted non-solutions like further privatisations, which have failed to deliver lower costs or better services for end-users.
Just ask Melbournians suffering on the Metro train network whether their lot has improved since the network was privatised in the late-1990s?
