If you want a text book example of why governance in Australia is busted, look no further than the NSW Government’s privatisation of the state’s monopoly land titles registry.
In April last year, the Berejiklian Government announced it would lease the state’s land titles registry to Hastings Funds Management and First State Super, after accepting their bid of $2.6 billion.
Upon the announcement, Premier Berejiklian and Treasurer Dominic Perrottet claimed the 35-year lease of Land and Property Information (LPI) would lead to better customer service and a “massive” infrastructure boost.
At the time, MB described the sale of the land titles registry as “everything that is wrong with privatisation”, and claimed it “utterly defies both economics and common sense”. Since the land titles registry is an essential government service and a profitable natural monopoly, its sale would very likely see end-users being gouged by the new monopoly owners, while the NSW State Government also losing a reliable income stream.
To make matters even worse, the sale proceeds from the land titles registry sale is to be used on two utterly useless projects: to demolish and rebuild the Olympic Stadium and the Sydney Football Stadium, both of which are fit-for-purpose and underutilised.
Today, the Daily Telegraph reports that the Sydney Football (“Alliance”) Stadium rebuild will deliver zero net economic benefits for the state, according to analysis by hired gun KPMG:
The Daily Telegraph has obtained the executive summary of the KPMG business case dated January 2018, currently being prepared for the Berejiklian government.
The KMPG documents, labelled “sensitive — NSW cabinet” boost the state government’s case to demolish and rebuild the Moore Park stadium, finding that the alternative of a simple refurbishment would have “significant capital costs for marginal improvements” and deliver “significantly negative net economic outcomes”…
…The documents put the cost benefit ratio at “approximately break-even”, for demolishing and rebuilding the stadium, meaning for every dollar spent there will be a dollar in economic benefit for the state.
This analysis will provide a boost to the Berejiklian government, which has been under pressure of the scale of the spend planned for stadiums. The government has previously put the cost of its Allianz stadium redevelopment at $705 million…
So the knock down and rebuild of the Sydney Football Stadium will deliver zero net benefits, even with KPMG’s highly optimistic assumptions. So why is this project going ahead? And why did the NSW Government sell-off the land titles registry to pay for it – a decision that will raise costs for NSW residents?
Clearly, the NSW Government has not heard of the broken window fallacy in economics. That is, rebuilding these stadiums is akin to digging holes just to fill them up again. While the projects might create jobs and increase GDP directly, they will cost taxpayers a huge sum, won’t boost productivity, and will do nothing to raise living standards.
The NSW Government has reached peak stupid.