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Issue #1626      February 12, 2014

Gov’t property and services:

Big Business wants the lot!

The Business Council of Australia has advocated privatisation of Australia Post in a submission to the Abbott government’s Commission of Audit. It’s also arguing that ASC Pty Ltd (formerly the Australian Submarine Corporation), the Australian Government Solicitor, the Australian Rail Track Corporation, Defence Housing Australia, Medibank Private, and NBN Co (the National Broadband Network Company) should all be privatised.

(Photo: Anna Pha)

Moreover, they want the government’s holdings in Snowy Hydro and other corporations, as well as valuable real estate owned by government bodies, to be sold.

Last year Australia Post made a loss of $187 million because of the rise of email and net communications and the consequent slump in letter deliveries. It should be possible to restructure Australia Post so that the level of letter delivery staffing corresponds to the demand, while maintaining postal letter deliveries. Excess staff could be retrained for other services, such as the internet and especially parcel delivery, the demand for which has skyrocketed.

The Minister for Communications and the management of Australia Post are now considering introducing facilities so post offices can provide passports, land title information and other services.

The Communication Workers Union has also suggested that Australia Post should offer banking services, especially in country areas, where the big four banks have closed down many of their offices.

But federal Treasurer Joe Hockey has adamantly ruled this out. As the union has noted with bitter irony, in the case of Australia Post banking services the government has suddenly lost its enthusiasm for commercial competition.

Australia Post is likely to implement many of the changes that have been suggested as a means of improving its commercial viability. But the government is then likely to sell off the entire organisation, which would have a devastating impact in rural areas.

Who gets rich quick?

Business lobbies and the Abbott government argue that selling government organisations makes sense because commercial firms would run them more efficiently. But firms achieve “efficiency” by raising the fees for services which were previously cheap or even free – or by eliminating unprofitable services altogether. The firm benefits, the taxpayer loses.

Regarding the sale of government property, particularly real estate, the chairman of CoreNet Global recently declared: “In corporate real estate theory no corporation should own property because the capital locked up in that property could be used for a better return for the corporation.”

If that sweeping generalisation was true no corporation would own its place of business. Buying such a property frees the corporation from the necessity to pay rent, so the capital isn’t “locked up”; it’s actually saving the corporation money.

It’s certainly true that private or publicly-owned corporations sometimes choose to rent rather than buy property, especially if they don’t have the capital to purchase, or if their occupation is short-term. But often the decision is made to buy because there is no “better return for the corporation” than the money it saves by not paying rent.

The theory is, however, being used to justify sale of valuable government real estate. The demands for ABC services are certain to increase, and the organisation will be around indefinitely – unless, of course the government succeeds in eliminating or privatising one or more of its areas of operation.

The private sector argues that the best investment for the proceeds of sale of government property is in new infrastructure projects. But that argument also has holes, because funding the project by that method, rather than by taxes, means that the infrastructure comes with a permanent burden of rent in some other area of government.

The big strategy

Speaking of tax, the Tax Office intends to shed 900 jobs over the next six months, and is now seriously considering implementing a scheme known as the “External Compliance Assurance Process”, under which the accountants of companies with annual turnovers of between $100 million and $5 billion, rather than the Tax Office, would determine the amount of tax the companies paid,.

A spokesman for the Tax Institute declared proudly, and with a perfectly straight face: “With the high levels of professional ethics in the profession, companies are not going to get a free ride”

The accountancy firms these corporations have hired to help them minimise their tax liabilities are the very ones that will be expected to ensure the corporations do the right thing by the taxpayer under the new scheme. And they will still be paid by the corporations, not the government. The scheme is clearly a case of “putting the fox in charge of the chookhouse”.

Economists have recently stated that the government should not sell off its remaining businesses, because the former sale of Telstra, Qantas and Sydney Airport was not a good deal for the Australian public. John Quiggin from Queensland University commented: “In general, the price received for assets has been less than their value in continued public ownership. And conversely, in cases where privatisation was proposed but did not go ahead, the actual earnings received have been more than the return from the estimated sale price”.

The proposal to sell off government businesses and properties must be seen as part of the government’s overriding strategy of facilitating private sector profitability. That involves minimising government restraints, selling off valuable government-owned real estate, privatising as many government operations as possible, helping to minimise the tax liabilities of corporations – and suppressing organisations such as the ABC, which might offer criticism of its actions.

And those are just some of the reasons why we should replace this government as soon as possible.

Next article – Public Forum on anti-people “trade” deal

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