Privatization has been the most used option by various governments all over the world as a strategic move to counter the debt. Though such policies can lead to benefits to the economy of a nation especially if there is a low interest rate like financing selected spending related to government work. The other associated benefits could be employment generation, diversification of the labor force, social stability, reduction in cost, innovation, upliftment of local business and so on (Scribd 2018).
Privatization in Australia
Let us now look at how things have been in Australia as a result of privatization:
Things have definitely not been on the brighter side since the privatization drive of the Australian public enterprises. It has been happening since the last decade or so and over the period, the pace has gone up drastically. Upon studying the pattern it seems that Australia is following the footsteps of New Zealand and Britain. It is being said that the previous approach of upgrading or renovating the public sector was a much better step compared to the present derivative approach (Unpan1.un.org. 2018).
What has been privatized?
Among those privatized are the commercial bank and that too the one that was one of the largest in Australia. The country has also privatized the domestic and the international airlines too. Even the naval dockyard was not spared. Privatization has happened in the defense sector of the country as well. All the manufacturing units of the military aircrafts have been privatized. The communication satellite system that was owned by the government has gone to the private sector. The pipeline system for the gas supply has been handed over. The rail service that was started for the remote or the uninhabited inland districts of Australia as well as the two smaller states are no longer with the government now (Unpan1.un.org. 2018).
The other set-ups that have been privatized include – the enterprise for engineering consulting and the serum labs, the pension scheme for the employees of the public sector in Australia, the housing infra-structure meant for the nation’s ex-servicemen, almost one-third of the national telecommunication setup and so on. The list further extends to the half century leases of the prime airports. The government doesn’t want to keep the remaining portion of the telecommunications along with the shipping line. Almost all of the nationalized banks as well as the insurance offices have been disposed of. Other setups like the grain storage, water supply system, state markets, and research establishments have been privatized too (Unpan1.un.org. 2018).
Things have been pretty unstable since the privatization process has not been a stable one across all the states and the territories in Australia. However, the privatization drive has been a massive one. In fact, the extent to which it has happened has left the Australian ownership to a small size at the end of the 20th century than what it was during the middle of that period (Unpan1.un.org. 2018).
The Method of Privatization adopted in Australia
The method selected has a direct impact on the outcome. The option of the public float was quite popular since this preferred by those who had the capacity to invest (Unpan1.un.org. 2018).
Most of the privatizations that have happened in Australia so far have been through:
- Trade sale to a reputed organization.
- Public Float
Listings at the stock market.
- Public Float
The only exception here was in the case of the Snowy Mountains Engineering Corporation. In this case, the transition took place through a purchase of a major chunk of the share of the firm. For a few, divestment took place via industry takeover. In few of the cases, the process was complete in several stages (Unpan1.un.org. 2018).
Gain & Loss due to the privatization
It is important to figure out the social, political, economic and financial impacts whenever there’s any major change in any system. Therefore, let us now check what was gained and what was lost:
Winners:Those who have gained from this move are the groups of senior executives (especially those of the divested companies who have made to the company taking over). In all probability, they must have received handsome allocations of market shares and too at discounted or special rates. The salaries of these people also appear to be quite handsome. For E.g. the new chief executive of the firm TABCORP was provided a salary package (post the privatization drive) of approx. $8 million. His figure was at with the other senior people before him. Similarly, Belconnen Mall (of Canberra) was offered a package of around 5.6 million.
Another group of people benefited by the privatization drive is the top government officials of Australia who in association with the top political leaders of the country have come with a so called new concept name NPM (New Public Management). The NPM manages and controls most of the administrative functioning of Australia. Their gain has come from the fact that things now will run as per the contracting out model along with the private provisioning of infra-structure. The gain has come from the fact that now they are no longer required to deal with any sort of conflict or stress associated with vast operational activities. They are now pretty close with the high level and high status elite personalities of the Australian political network. Thus, this has given them access to enhanced work opportunities as well options for better careers. This fits well with what is termed as the ‘Client Politics’ wherein the gains of public regulatory are ear marked for a group that is small in size and easy to mobilize.
Losers:With increasing Australians having shares, and enjoying the advantages thereof, has led to a situation where the unemployment level has shot up. The trade union that had previously existed is gone and as a result, the interests of the workers are no longer being safe guarded. It is obvious that the trade unions are comparatively weaker in the private sector. In fact, privatization is at times used as a means to weaken the union system. This has led the situation to a point where there is a gap between the wealthy and the under privileged. In fact, as per an estimate (Landt and Beer, 1998), by the end of the 20th century, the affluent were earning almost 13 times more than the poor. Whereas, during the early 80s, this ratio was 8 times (Unpan1.un.org. 2018).
In case of Australia, the privatization process has been doing its round since the 1980s (in whatever form or manner it might be). It was part of the microeconomics reform for the denationalization of GBEs (government business enterprise), contracting out of numerous government controlled services along with the reforming of the common services sector for the common man in Australia like communication, water, transport, energy, etc. The drive for this approach came from a number of factors, namely:
- A perception that the economy of Australia was not doing well. As per the first Annual Report given by the Industry Commission, the industry growth of the country was comparatively low compared to the OECD nations especially in the sector dealing with facilities for the average citizen of Australia.
- The requirement of fiscal rectitude by the government was another factor. There was an urgent need to lower the GBE expenditure and generate income from other alternate sources (Abbott and Cohen 2014).
Hence, decentralization seemed to be a good option for the Australian government for the generation of short term revenue. This was initiated to counter government debt, the spending of fund and to get relieved from taxes.
Abbott, M. and Cohen, B. (2014). A Survey of the Privatisation of Government-Owned Enterprises in Australia since the 1980s. Australian Economic Review, 47(4), pp.432-454.
Scribd. (2018). Http Www.aphref.aph.Gov.au House Committee Trs Networks Subs Sub014 | Rail Transport | Public–Private Partnership. [online] Available at: https://www.scribd.com/document/280006188/Http-Www-aphref-aph-Gov-au-House-Committee-Trs-Networks-Subs-Sub014 [Accessed 27 Dec. 2018].
Unpan1.un.org. (2018). [online] Available at: http://unpan1.un.org/intradoc/groups/public/documents/EROPA/UNPAN001420.pdf [Accessed 27 Dec. 2018].