The privatisation of the state’s ports continues to harm to our local economy. Last week Deputy Premier John Barilaro said it was time to “unpick” the NSW Government’s ports privatisation arrangements. That’s good news.
He was responding to the Federal Court’s rejection of the ACCC’s invitation to declare the arrangements the O’Farrell Government secretly entered into when it sold Port Botany illegal, an arrangement which guaranteed Botany’s new owner financial compensation if Newcastle’s port expanded its container capacity. The O’Farrell Government received $5.1 billion for the monopoly public asset, twice the amount originally anticipated.
The compensation payments are to be paid by the NSW taxpayer in the first instance, then recovered from the owners of the privatised the Port of Newcastle. This protection racket has a life of 50 years.
It is difficult to imagine a government sanctioned arrangement with greater potential to do harm to productivity, consumer prices, and our economy. The lesson for governments is clear: do not privatise monopoly assets without putting the necessary regulatory arrangements in place to protect the economy, competition, and consumers.
For more than a decade the Hunter Region’s business and political leaders have dreamed of diversifying and expanding the Port of Newcastle. The proposed jobs-creating Multi-Purpose Deepwater Terminal could accommodate a 2 million per annum container terminal.
Newcastle is home to the largest coal port in the world and its resident coal terminals will load our high-quality coal for decades to come. But building further diversity and adding to economic activity would be of considerable benefit to the Hunter Region.
Beyond building competitive tension in the container market, a large operation in Newcastle would bust road and rail congestion in Sydney and make the goods-movement network more efficient.
So, what might John Barilaro’s “unpicking” look like? He may not have to do much. Courts may yet do the work for us on appeal. If they were to do so, screams of unfairness would be blunted by the principle of “let the buyer be aware”.
Killing the sale deed arrangement with an Act of Parliament is another option. But would that be fair? The deed enticed Port Botany’s buyers to pay a significant premium for the asset. Investors would be justifiably aggrieved if a parliament was to act in such a retrospective way. A debate about compensation would surely follow. It’s clear there are no easy or inexpensive solutions.
While Premier Gladys Berejiklian ponders the potential fiscal cost of correcting the consequence of the Government’s actions, she might also seek advice on how she might fix another complex problem at the Port of Newcastle. A problem created when the monopoly Port was privatised, again without regulatory protections.
The Port of Newcastle is doing battle with the mining industry over port charges on their exports. The miners are right to be concerned about rising prices, but the Port’s owners need revenue-certainty to fund their growth and diversification plans. Fixing this problem without harming a key export industry may require some more public investment. Surely there remains some change from that Port Botany sale windfall.