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As we approach the November state election, this debate will pop up again. Both Labor and the Coalition will feel the pressure to provide goodies to voters and the state’s debt position leaves little room to fund projects out of the existing budget.
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The Coalition has gone to elections promising to privatise sewerage and in 2024 the government explored privatising Births Deaths and Marriages, before ultimately backtracking.
Treasurer Jaclyn Symes has told investors the government wants to take risks and partner with the private sector more, according to the Australian Financial Review.
Just this week, we were reminded that Victoria is looking at ways to privatise the state’s alpine resorts after sustained deficits.
But what are the trade-offs? History would suggest that these partnerships aren’t all Mai Tais and Yahtzee.
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This week, we learned the service fee the government pays to use the land registration system it part-privatised, Secure Electronic Registries Victoria (SERV), is rising faster than the charges the government collects from consumers.
This is one of the key reasons the state has proposed increasing the land title fees we pay, boosting combined revenue by 44 per cent, $73 million a year, and helping them to pay SERV among other costs.
At least they had the decency to propose doing this by raising fees on higher-value properties and reducing them for those below $1 million.
But it flies in the face of what the government said at the time to reassure voters.
Announcing the deal, they said the state “will retain full control over prices for statutory land registry services throughout the 40-year term”.
If the government has to raise its prices to keep up with the cost of paying SERV, is it really in control?
VicRoads, which was “commercialised” with the promise of better service ahead of the 2022 election, had its performance targets lowered after the state government pocketed a $7.9 billion cash injection.
Consortiums that get these contracts have big financial backing – they wouldn’t get involved if there wasn’t a return on investment.
So why do governments keep going down this path?
Australia Institute chief economist Greg Jericho told this column that governments embraced privatisation because it provided a sugar hit to their budget and disputed the idea that the private sector was more efficient.
The trade-off, he said, was that they were left with less control at times when big policy changes were needed, like with energy, or cut out of potential windfalls, as with the sale of Telstra.
A peek inside the government’s head can be seen through the example of Peninsula Link, which has had to lower speed limits because “unseasonably cold and wet” conditions in Melbourne last year delayed upgrades.
Peninsula Link is one of multiple major roads across Victoria where a consortium receives a regular fee in return for its construction and decades of maintenance.
The Age reported in 2019 that the cost of this 25-year arrangement was $2.75 billion. The government estimated that if VicRoads had managed the road instead, it would have cost an extra $10 million over the same period.
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The state government is responsible for more than 23,000 kilometres of public roads in Victoria. If this costing is accurate, something has gone horribly wrong.
Before you start calling me Karl Marx, I should say the Victorian economy is too reliant on government spending, and we need to unlock private sector investment, particularly in areas such as housing.
But if either party promises they can sell or lease an asset and everything will be just peachy, just remember it’s an election year.
Kieran Rooney is a Victorian state political reporter at The Age.
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