Privatisation disaster looms in NSW by Peter Robson & Kamala Emanuel, Sydney

NSW Premier Morris Iemma


Although it was silent on the issue during the state elections, the NSW Labor government led by Premier Morris Iemma is canvassing plans to privatise large sections of state utilities including the rail network, the electricity grid and Sydney’s ferries. The privatisation scheme is necessary, according to the government, to raise funds in order to reduce the budget deficit and pay for improvements in NSW hospitals and schools, and upgrades to the Sydney highways, as well as produce greater efficiency in public transport.


Scepticism about the plans are warranted however, particularly in light of the disastrous semi-private infrastructure built through “public-private partnerships”, such as the cross-city tunnel and the Sydney airport rail link. These PPPs have resulted in massive amounts of public funds going to private developers and under-utilised (and expensive) public services.

Sydney’s rail network has been woefully underfunded. This was exposed in 2003, when a petrol price spike encouraged many people to abandon their cars and commute via rail. This led to a tripling of the average number of passengers. The rail system was unable to cope, resulting in overcrowded trains and delayed services. Most commuters returned to their now-more-expensive cars, but even so rail services remained inadequate.

In order to give the appearance of improving efficiency, the state government redefined “late” trains, reducing the regularity of train services at peak times to one only every 15 minutes. Worldwide train services average one every five minutes for major industrialised cities at peak times.

This didn’t fool many commuters, and the system is still perceived as inadequate. But the state government has ruled out putting more money into the infrastructure of the railways. “We really are at the upper limit of our expenditure capacity on infrastructure in NSW currently”, transport minister John Watkins told the Sydney Morning Herald on November 2. “To go any higher in our budget puts us in a difficult position with regard to our AAA credit rating and the long-term capacity of our budget.”

Insiders in the NSW rail system say that the employees of RailCorp are already being prepared for the move to a privatised system, with train drivers and maintenance crews getting more shifts on the same lines and the same services. The current proposal by the government is to break up the NSW rail network into different sections, such as a regional southern section covering Wollongong another for the central coast and northern NSW, and a Sydney city section. These would be sold separately to different companies that would, in theory compete against each other. There is also discussion of a separate, privately owned underground rail network in Sydney.

Workers, who have been prepared for the break-up by only getting shifts in areas where the new companies would be, could then be handed over to those new companies already trained. This would also dilute the power of the Rail, Bus and Tram Union (RBTU), which the Sydney Morning Herald described as a NSW Labor “cabinet desire”, by reducing the size of workplaces and members’ ability to act together in solidarity.

A similar proposal is being made for Sydney ferries. A PPP is planned for the system, with the government retaining only the right to set timetables but not ticketing or any other aspect of the ferry system.

The RBTU and Maritime Union of Australia are campaigning against these “part” privatisations of the rail and ferry networks, and the Australian Services Union is running an awareness campaign in regional NSW on the impact of privatisation on the regional lines.

Bizarrely, given the state government’s lack of serious funding, it is unions that have copped much of the blame for NSW’s public transport woes. Typical are comments by former transport minister Carl Scully quoted in the November 2 SMH. The paper reported: “He said he found the unions ‘very, very difficult’ to deal with.

“‘The management and culture approach of the unions is in a time warp … the only way to have a root and branch alteration is to set up the [separate] metro system’, Mr Scully said.”

Yet it’s not a union’s job to make up for the state government’s mismanagement and underfunding of NSW public transport. Unions are there to protect their members’ interests — their pay and work conditions. In doing so, unions help the rest of the community by preventing job cuts that would impact on services and safety. What the government really wants is fewer workers to work more for less pay — how this will improve public transport is never quite explained.

Because the state government is committed to not seriously investing in public infrastructure, business is supposed to ride in like a white knight and rescue both the government and the populace from their dilemma through PPPs. Business provides extra funding for the development of “public” services, in exchange for the right to make money off running them. But Business doesn’t just want the right to try and make money from public services, they want guarantees.

For both the cross-city tunnel project and the airport rail link, the state government was required to guarantee profits for the companies involved. In both cases the profits were less than expected. As a result, the state government was forced to pay damages to the aggrieved corporations. This hasn’t stopped business and government from presenting PPPs — which in the end amount to little more than corporate welfare — as a “silver bullet” for problems with public services.

The executive director of the NSW chamber of commerce, Patricia Forsyth, has made it clear how far business wants the government to go. On March 27, ABC Online reported that she was arguing for the NSW state government to sell off, or part-privatise some, if not all, of its “uncompetitive assets”. “Forests would be another area where there’s no justification to why you actually need a state forest. I think it’s time to have a look at the prison system. And I think it’s time to have another look at electricity generation.”

On September 11, Iemma said that the NSW government would consider “part privatisation” of the state’s electricity industry in order to fund a $7 billion upgrade to highways. Not only will this likely be a disaster for consumers when the corporate vultures flock in to do some price-gouging, but it is a potential eco-disaster — corporations are in it for the bucks, with the environment typically a distant priority (if at all).

In California, privatisation of the power industry led to increasing blackouts, brownouts and accelerating costs to consumers in 2003, as the power industry makes most of its money at times of peak demand or jumps in demand. This is because such jumps require the use of “peak” power sources that supplement the grid during times of high demand. Peak power stations are more expensive to run and allow power companies to charge thousands more per kilowatt hour. Therefore it is in the interest of private companies to artificially create such demand, either through powering-down baseload stations, or running the peak stations when it is unnecessary to do so. Notorious corporate criminal Enron made a great deal of its ill-gotten gains through such schemes.

Privatisation of the power industry will only deliver job cuts and insecurity for the workers in the industry, worse services for the community, and less ability for the government to address greenhouse gas pollution. The September 11 crash of the NSW carbon market shows the market can’t be trusted to deliver greenhouse gas emission reductions. Instead, the government must act now to directly fund an expansion of wind, solar and other renewables and phase-out reliance on coal.

Behind this government’s privatisation frenzy is adherence to neoliberalism — so-called “economic rationalism”. Instead of seeing the need to better fund public infrastructure, the government sees opportunities to throw capital a bone. There is a fundamental contradiction between the public services we need and corporations’ need to make a profit: The experience of the cross-city tunnel and the airport rail link show that privatisation doesn’t deliver for working people. The only ones that will be satisfied by this privatisation orgy will be big business.

[Kamala Emanuel is a Senate candidate for the Socialist Alliance, and the alliance’s spokesperson on climate change. Peter Robson is a staff writer for Green Left Weekly.]

From: Comment & Analysis, Green Left Weekly issue #732 21 November 2007.