Government | Regulation

Growth 50: Privatisation: A Review of the Australian Experience

Privatisation is about designing an optimal mix of ownership and regulation to achieve the best outcomes for society. Private ownership with regulation is one option. In other cases, government ownership may better achieve society’s objectives.

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Privatisation in Australia is bringing mixed results, this report argues. Private ownership with regulation is one option. In other cases government ownership may better achieve society's objectives. But neither option is perfect - this is the fundamental privatisation trade-off.

Edited by Margaret Mead and Glenn Withers, Growth 50 contains the views of Australia's leading economists, policy advisers and public commentators on the effectiveness of privatisation programs in Australia.

Most contributors to the report agree that privatisation is beneficial when it results in private firms operating in a competitive market. But contentious issues can arise when natural monopoly assets are privatised. The crux of the privatisation debate lies in those areas where markets may not achieve the desired objectives. In some areas competition may not be viable; in other areas private incentives may not match public welfare criteria.

While there are still many government assets which could be sold, many of these assets provide services which are not profit-making. These sectors are more likely to involve private sector participation through long-term contracts, rather than divestment. However governments will need to improve their skills in designing and managing contracts in order to attract private capital into these areas.

The report also notes that:

  • The overall verdict on privatisation from a consumer perspective is one of mixed success, with insufficient attention to consumer outcomes.
  • Governments are grappling with the need for a new or extended accountability model when monopoly business activities are privatised.
  • Governments should not be allowed to use privatisation as an expedient source of funds.