The Queensland premier, Campbell Newman, is dead wrong on the subject of electricity privatisation. It might be true that the people in that state don’t like the idea, but it’s his job to persuade them, and lead, not meekly give up on what he knows to be true.
Selling state-owned businesses is about the best thing a government can do. It’s the best thing Jeff Kennett did in Victoria, setting the state up for nearly two decades of prosperity, not to mention the nation’s most efficient electricity system.
And selling Qantas, Commonwealth Bank and Telstra were three of the best things successive federal governments did in 20 years of government.
In fact it’s fair to say that the Telstra sale in particular is a big factor in the success of the Australian economy now.
It meant that, despite the fiscal profligacy of the final years of the Howard government (spending on the commodities boom tax windfall on tax cuts), the Labor government of 2007 entered the GFC with no debt.
That meant that Australia’s fiscal stimulus during the global recession of 2008 could be among the world’s biggest without endangering our AAA credit rating.
As a result the currency is strong and tradeable goods prices are falling. As shown by yesterday’s CPI report, underlying inflation overall is 2.3 per cent – well under control – and there is room for further interest rate cuts, if needed. That’s why the Reserve Bank doesn’t need to engage in money printing.
The popularity of the Australian dollar among central banks in particular is forcing some painful cost cutting on manufacturing to compete with cheaper imports, but overall unemployment remains low and household wealth is rising, with both the sharemarket and house prices surging as the new year gets underway.
Of course, we can’t put all this down to the privatisation of Telstra, but it was certainly an important part of it.
Privatising Queensland’s electricity business would likewise set up the state’s finances and its economy and lead to a better run power sector. Campbell Newman knows that; the only reason not to do it is political cowardice, especially this early in his premiership.