Australia is readying a plan to sell potentially $130 billion dollars in assets ranging from Medibank Private to electricity poles, hoping to set an example to cash-strapped governments around the world that need new funds to boost their economies.
Treasurer Joe Hockey, who will chair a meeting of finance ministers and central bankers from the Group of 20 developed and developing nations this month, said the government was finalising a deal with state counterparts to prioritise assets and businesses that could be sold to private investors.
"We are going to free up the capacity to get on with the job of building things," Mr Hockey told The Wall Street Journal in an interview at his parliamentary office in Canberra. "We're going to form a partnership with the states that is going to be rolled out over the next few months, which is hugely exciting, and involves potentially massive transactions that will get the place moving."
Governments around the world are weighing asset sales to plug holes in their budgets as tax revenues fall.
Last year, the United Kingdom sold a majority of its interest in state postal service Royal Mail through an initial public offering in London, raising more than £1.7 billion ($A3.1 billion). New Zealand's conservative government also has raised billions of dollars through selling stakes in power generators and national flag carrier Air New Zealand Ltd, aiming to return its budget to surplus by 2015.
Mr Hockey said money raised would be plowed into infrastructure projects to boost jobs and growth in the world's 12th-largest economy. Among the biggest projects being considered is a long-delayed new airport in Sydney to ease congested skies above the country's largest city.
Australia's asset-sale plan is likely to be announced in the conservative government's first budget on May 13. "There is potentially $130 billion in privatisable assets in Australia, maybe more," Mr Hockey said, pointing to utilities and transport networks as obvious candidates for sale.
Mr Hockey said governments needed to be as small as possible to be at their most effective. Still, his parliamentary office gives a nod to a wide range of political views, from biographies of left-wing wartime prime minister John Curtin to long-serving conservative leader John Howard, a mentor of current Prime Minister Tony Abbott. Behind his wooden desk is a ceramic figurine of Winston Churchill, a few feet away from one of Chairman Mao standing in a Red Flag limousine.
Australia is aiming to use its presidency of the G-20 to secure financial-market reforms, such as overhauling tax regimes, while tearing down tariff barriers and encouraging private-sector investment. As part of this drive, Mr Hockey wants emerging economies such as India, Mexico and South Africa to curb state involvement in industry, using Australia's triple-A-rated economy as an example of success that can be achieved.
Part of Australia's message is that private investors need to invest more in viable infrastructure projects in emerging economies. Many of these projects are stuck on the drawing board because investors, who made big losses during the financial crisis in 2008, have yet to regain their appetite for risk. Jitters among investors in emerging economies were underscored by sharp falls in currencies and share markets in recent weeks, fueled by rising inflation and interest rates as the United States winds back its bond-buying program.
Mr Hockey said investors had overreacted in the past few weeks, while recognising that volatility in financial markets was likely from time to time. "I'm confident there is no systemic problem in developing nations, " he said.
To help drive private appetite for exposure to emerging-market infrastructure, the G-20 under Australia's leadership could help build credit-ratings firms' capacity to assess risk in new projects, backed by more coordination with multilateral development banks such as the International Monetary Fund, the World Bank or the Asian Development Bank.
"You can't remove sovereign risk, but you can reduce it for investors in infrastructure, and the easiest way to remove sovereign risk is to have documentation and investment products that are familiar to investors, wherever they are located and wherever the asset may be," Mr Hockey said.
He also called on the US Congress to agree to stalled IMF reforms that would increase the voting share of emerging economies such as China and Brazil in steering fund operations, as well as doubling its resources to $US733 billion, in a shift that has polarised some US lawmakers who this month blocked ratification of the move.
"Common sense must prevail on this, because it's now reflecting poorly on the United States, and that's the last thing I'd like to see," he said.
Mr Hockey said he also favoured infrastructure bonds to help lift private investment interest -- an idea his party floated before winning September elections -- following projections that the country needed to invest as much as $700 billion in new public infrastructure.
Mr Hockey said the government had begun moving to sell state-owned health insurer Medibank Private in a first move.
Analysts think Medibank could fetch up to $4 billion, helping to repair a $47 billion budget shortfall in the current fiscal year through June as the country's $1.5 trillion economy slows following the end of a long mining-investment boom.
"From my perspective, the sooner we get out of running businesses the better," said Mr Hockey, a former investment-banking lawyer.
"We need to have a domestic growth package, which we'll be focusing on in the upcoming budget, focusing on productive infrastructure. We recognise that there is an investment gap approaching as the mining-investment boom phases out and the production boom increases."
Mr Hockey was heavily criticised -- including by the US State Department -- in November for standing in the way of a $3 billion bid by American agribusiness giant Archer Daniels Midland Co for Australia's biggest grain handler, GrainCorp Ltd. But he said the decision appeared not to have raised Australia's sovereign-risk profile.
"We've had a surge of [foreign-investment] applications since," he said. "You will get odd instances where there is a special case, individuals might be knocked back, but they are very, very rare."
Dow Jones Newswires