Privatisation is lifting prices and hurting the economy: ACCC chief Rod Sims

The privatisation of public assets is “severely damaging” the Australian economy by lifting prices and hampering productivity, according to Australian Competition and Consumer Commission chair Rod Sims.

Speaking at the Melbourne Economic Forum on Tuesday, Sims urged Australian governments to put an end to explicitly trying to maximise proceeds from the sale of public assets, something the competition boss says is causing him to become increasingly “exasperated”.

“I think a sharp uppercut is necessary and that’s why I’m saying: stop the privatisation,” Sims said, according to Fairfax.

It’s a view shared by Peter Strong, chief executive of the Council of Small Business of Australia, who told SmartCompany Sims’ comments are “spot on”.

“Governments need to stop and have a look at what their role is, “ Strong says.

“Privatisation should make markets more efficient.”

Sims said recent sales of government-owned ports and electricity infrastructure, as well as the deregulation of the vocational education sector, has caused him to change his views on the effects of privatisation on the economy.

“I’ve been a very strong advocate of privatisation for probably 30 years; I believe it enhances economy efficiency,” Sims said at the forum.

“I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales and I think it’s severely damaging our economy.”

Sims told the forum that the privatisation of electricity infrastructure in Queensland and New South Wales has caused consumer prices to almost double over five years.

“When you meet people in the street and they say ‘I don’t want privatisation because it boost prices’ and you dismiss them … recent examples suggest they’re right,” he said.

“The excessive spend on electric poles and wires has damaged our productivity. The higher energy price we’re getting from some gas and electricity policies are damaging some of the our productive sectors.”

Sims also highlighted the privatisation of ports, including Port Botany and Port Kembla in NSW and the Port of Melbourne, which he said has created monopolistic circumstances.

Strong adds the operation of airports to the list of sectors where there is potential for a large, private operators to control the market with little competition.

“An example of why [Sims] is right is the second airport in Sydney,” Strong says, referring to Sydney Airport Corporation, the operator of the Sydney Airport, having the right of first refusal to develop the Western Sydney airport site.

“Where’s the competition?”

Strong says the presence of oligopolies, or markets that are dominated by a small number of firms, can have detrimental effects on small businesses operating in the same space.

While Australian governments have in recent times spoken about the need for innovation in the economy, Strong points to figures from the OECD in 2014 that found Australian SMEs were ranked fifth out of 29 OECD countries in terms of innovation, while large Australian businesses were ranked the 21st most innovative out of 32 OECD nations.

“I believe the reason why big businesses aren’t innovative is because they have no need to be; they have market dominance so there is no motivation,” Strong says.