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Poles and wires plan combines the worst features of past privatisations: report

The Baird government's plan to use the proceeds from the 49 per cent lease of the state's poles and wires to build infrastructure combines the worst features of privatisations undertaken over the past two decades and will weaken the state's financial position, a report by a leading academic economist says.

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Professor John Quiggin, an Australian Research Council Laureate Fellow at Queensland University, said poorly conceived characteristics of the proposal meant the fiscal loss to the public will "be at the upper end of the range observed in past privatisations".

He estimated that loss could be as high $1 billion a year on a cash basis or $2 billion a year on an accrual basis.

The Coalition said the proceeds from leasing state electricity assets will contribute to the construction of $20 billion worth of infrastructure including almost $9 billion on urban public transport.  

If re-elected, it will issue a 99-year lease on 50.4 per cent of its interest in electricity distributors Ausgrid and Endeavour and 100 per cent of the high-voltage transmission business, Transgrid.


Essential Energy, which operates poles and wires in rural NSW, will remain in full public ownership.

Professor Quiggin, a long-term critic of electricity privatisation in Australia, said the proposal "combines all the worst features" of past Australian privatisations.

These shortcomings include offering the assets for partial lease rather than outright sale; offering those leases at a time of high regulatory uncertainty; and the allocation of proceeds to large new expenditure programs.

"The fiscal loss to the public will therefore be at the upper end of the range observed in past privatisations," the report said.

Professor Quiggin claimed the government's policy package "will substantially reduce the net financial worth of the NSW public sector, and contribute $1 billion to $2 billion annually to the budget deficit".

The Baird government's privatisation plan has strong support from business groups but opinion polls show a significant level of voter opposition.

"The electoral unpopularity of privatisation reflects a mature public judgement based on long experience," the report said.

"The exclusion of Essential Energy from the asset sale program reflects strong opposition in a core element of the government's support base."

Professor Quiggin said the report was done on his own initiative without any external funding or commissioning. In the past he has been commissioned by trade unions to report on the sector.

It says politicians persist with the idea that asset sales are a "magic pudding", which can be used to get something for nothing.

"The Australian public does not share this delusion, and voters have repeatedly rejected proposals for privatisation," said the report, No Magic Pudding: How the Baird government's asset lease strategy will weaken the fiscal position of the NSW state government.