Australia needs to look longer term
As Australia continues to see increasing moves towards port privatisation, the head of its competition watchdog has warned against making short-term gains at the expense of long-term benefits for the community.
ACCC chairman Rod Sims told the Infrastructure Partnerships Australia conference that privatising ports for immediate financial benefit could come at the cost of an effective tax on future generations. His speech focused on how reforms to infrastructure can contribute to restoring Australia’s economy.
Pointing out that state governments are investing in projects using the funds from privatising their ports and other key infrastructure assets, he said this creates a strong incentive for structuring the sale to maximise the selling price.
“In order to maximise sale prices, governments will have little incentive to closely examine whether the market structure and regulatory arrangements that will apply post-privatisation are conducive to competition and appropriate outcomes,” said Mr Sims.
Without safeguards in place, there was a strong likelihood that users of privatised infrastructure would face higher prices and restricted access. A further concern would be if infrastructure owners engaged in monopoly rent extraction.
“Monopolies, therefore, generally require effective economic regulation,” he said, adding that transferring market power to private hands can limit investment and innovation.
