Australia: the consequences of privatised infrastructure

According to The Age on July 17^th this year, advisory body "Infrastructure Australia" is frustrated with ever worsening infrastructure log-jams. Whether we're talking about ports, roads, public transport, communications or new utility infrastructure (gas, water, electricity) – the trend for many years now has been mainly towards infrastructure privatisation – usually in the form of Public Private Partnerships. (PPPs)

In fact both Labor and Liberal governments have been guilty of jumping on the "PPP bandwagon" – to the benefit of their friends in the private sector for whom PPPs were often akin to "a license to print money'. Now 'Infrastructure Australia' is urging either public finance of new infrastructure – or privatisation of existing infrastructure and imposition of user-pays charges in order to provide the funding for new roads especially.

According to Tim Colebatch, Australia has a choice in how it pays for an estimated $700 billion in socially and economically necessary infrastructure over the coming decades. See:

In fact we have three options.

a) We can continue to allow the infrastructure backlog to accumulate – actually damaging our productivity and quality of life – especially for families in emerging suburbs where transport infrastructure is negligible.

b) We can impose user pays charges upon existing roads or privatise them outright

c) We can actually raise taxes and invest in infrastructure the old way – via public borrowings and infrastructure bonds

Tim Colebatch raises the spectre of Australia and its various state governments losing their AAA credit rating were we to lift our borrowing ceiling. But what if said borrowing was clearly established as being fiscally sustainable by raising taxes to the level necessary to service and repay the debt? And if increasing a nation's debt ceiling results in a reduced credit rating – regardless of said states' structural capacity to service the debt – does this make sense? Or is it an Ideological prejudice that 'locks in privatisation'? Indeed: Can global or regional social credit provide an alternative? Such questions need to be posed now more than ever.

Public finance of infrastructure is preferable for a number of reasons.

Firstly the Federal and State governments can borrow at a more competitive rate than any private sector operator.

Secondly, the argument that PPPs 'pass on risk' is fallacious – as when PPPs fail governments inevitably have to step into the breach and pick up the pieces.

Thirdly, privatised infrastructure involves user-charges that operate like regressive, flat taxes. Not only are the increased cost-structures of private finance passed on to consumers: but low and middle income groups are disproportionately affected.