Electricity, gas and housing affordability crises have finally hit the nail on the head of years of policy paralysis imposed on governments of all shades, obsessed with a budget surplus and the belief that privatisation is the only way to unleash economic dynamism.
Governments are shying away from investing in the future in the name of repairing the budget, and privatisation and deregulation are seen as the only way to reignite growth or create wealth and prosperity. Both are also thought to fatten the government coffers and contribute to 'budget repair'.
The deregulated infrastructure sectors have become private monopolies, resulting in decreased investment, job cuts and higher prices.
Where governments withdraw, the private sector is supposed to fill the void to present the nation with excellent infrastructure. We are also told that the governments need not expand social security, and should, in fact, retreat from social services, as the private sector would create enough high-paying secure jobs, if only the labour market were more flexible.
These are nice stories, told by troops of business commentators and 'rational' economists.
Alas, we see a different reality. Governments lost their secure source of revenues as they sold off profitable enterprises, and new private owners use tax loopholes and tax havens to avoid and evade taxes. They even get subsidies and tax credits. Sydney Airport Authority is a glaring example of how, through privatisation, the government has lost the pot of gold or killed the goose which laid golden eggs.
After years of deregulation, the ACCC Chairman Rod Sims calls for reregulation of monopoly infrastructure as envisaged by the Hilmer Committee. He also sees it wrong to suggest that we should not be concerned about high monopoly pricing of infrastructure, because the result is only a pure transfer of economic rent.
Sims is bold enough to acknowledge that after believing for about 30 years that privatisation enhances economic efficiency, he is "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".
Sims said the sale of ports and electricity infrastructure and the opening of vocational education to private companies had caused him and the public to lose faith in privatisation and deregulation. While billions of dollars had been wasted in the scandal-plagued vocational education sector since it was opened up to the private sector, the deregulated infrastructure sectors, such as gas and electricity, have become private monopolies, resulting in decreased investment, job cuts and higher prices.
Meanwhile, full-time jobs are rapidly disappearing as casualisation and outsourcing are on the rise; job security has become something to be nostalgic about; skill shortages are being filled with vulnerable temporary work visa holders whose exploitation has become a "national disgrace"; wage growth continues to stagnate; and the average executive salary and worker's pay gap grows wider.
By being held hostage to financial market sentiments and tying itself to the unrealistic budget repair dogma, the government has lost the opportunity to borrow at historic low interest rates to renew our crumbling economic and social infrastructure.
Yet our politicians, surrounded by privatisation cheerleaders, want company tax cuts while the budget bleeds and go for cuts in social services in the name of cost blowouts. They still continue to believe in the benefits of privatisation and outsourcing of government services. They are not willing to tackle detestable pay packages of executives who find ways to avoid tax, yet rejoice at the cuts in wages of low-paid workers.
The widening income and wealth inequality, as well as ballooning household debts due to falling or stagnant wages, is not only fuelling raw populist and nativist sentiments, but also dragging the economy down and, with it, tax revenues. It is also making our economy more vulnerable to external shocks as it becomes more dependent on China or India's economic boom to make up for falling domestic demand.
Years of inaction by governments due to dogmatic fiscal conservatism and privatisation have resulted in crumbling infrastructure. This is adding a massive cost to the economy. The following recent estimates by the American Society of Civil Engineers from the American economy illustrate the magnitude of losses. Each household will lose $3,400 between 2016 and 2025 due to infrastructure deficiencies.
Sadly, we no longer see the kind of leadership that is needed for such forward-looking bold actions that gave us the iconic Snowy River Hydroelectric scheme -- Australia's biggest infrastructure project. The project still stands as a testimony to what a resolute Commonwealth Government can achieve with the cooperation of the State Governments.
The politicians of recent times are not visionary leaders; but are driven by short-term political mood and hence are hostage to populist nativist sentiments. Regrettably, they no longer lead, but are led.
Finally the Prime Minister appears to be acting when he announced a $2 billion intervention in Australia's electricity supply debate by expanding the Snowy Mountains hydro scheme. Interestingly, this will be the first major expansion of the project since it was completed in 1974. Ironically, the Prime Minister's announcement comes after deriding renewable energy sources and going hard on the South Australian government's $550m energy plan raising the scare of debt.
But perhaps it comes too late. The global economy seems to be heating up and the days of low or negative real interest rates may soon be over. It seems by being held hostage to financial market sentiments and tying itself to the unrealistic budget repair dogma, the government has lost the opportunity to borrow at historic low interest rates to renew our crumbling economic and social infrastructure and build the foundation for sustainable development.
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