Key Reasons for Privatisation of Public Utilities in Australia - Essay Example

Key Reasons for Privatisation of Public Utilities in Australia Total Number of Words 038 Introduction Privatisation is basically the act of fully or partially transferring the ownership, management, finance or control of a public asset(s) to the private sectors. (ILO, 2001, p. 5) In line with the meaning of privatisation, Savas (1993, p. 40) explained that privatisation of public utilities simply means that the people will have to rely more on the private sector rather than the government when it comes to satisfying the basic needs of the local people. Since the 1990s, the Australian Governments together with the Commonwealth and the State has decided to gradually privatise a large number of its public utilities particularly within the three sectors known as the: (1) financial services; (2) electricity and gas; and (3) transport and communication (Reserve Bank of Australia Bulletin, 1997, p. 7). Basically, there is absolutely nothing wrong with privatising public enterprises especially when there is a strong need for the government to come up with large amount of money to finance the development of public infrastructure or given that the government is no longer capable of properly managing a business enterprise. However, it is also possible for the entire society to experience economic and social problems given that the selling of public utility to the hands of the private sector heavily involves infrastructure (Strachan, 1998). To enable the readers to have a better understanding why the Australian Government heavily relied on privatisation back in the 1990s, the key reasons behind the privatisation of public utilities in Australia will be thoroughly discussed. In the process of going through the main discussion, the possible consequences or effects of implementing the privatisation of public utilities in Australia will be tackled followed by demonstrating real-life examples to support the student’s point-of-view. As part of the conclusion, whether or not the key reasons behind the privatisation of public utilities in Australia can be considered as a good political strategy in terms of being able to provide the general public with affordable and good quality services will be justified. Key Reasons behind the Privatisation of Public Utilities in Australia For many years, Australians had become very dependent on the Australian government when it comes to the delivery of good quality public services. As part of considering the social welfare of the general public, the government had to spend a large sum of money to improve the public utility services without overcharging the people with the quality services they receive. Partly because of globalization and the limited amount of money Australian government has been collecting out of taxes, Aulich & OFlynn (2007, p. 154) explained that the most common reason why the Australian government decided to privatise some of its public utilities is mainly due to the following reasons: (1) divestment of public enterprise; (2) outsourcing of the delivery of public services; and (3) the increase in the cost recovery by the government agencies. The word ‘divestment’ simply means that the government intentionally sells some of its public utility to the private sector. In general, the government could simply decide to let go out its ownership power over a public utility in case the state does not find it possible to manage and provide the people with outstanding services. Rather than going through a series of problem-solving trying to make the public utility operational for the public use, Australian government could simply sell public utilities that are no longer generating profit. This particular strategy will enable the Australian government to have more free time trying to solve other more important public issues like economic and social problems related to high unemployment rate which has lately arised out of the global crisis. Likewise, there are also some cases wherein the government simply needs to sell a public utility as a way of recovering from its excessively high operational costs. Consequences or Effects of Implementing the Privatisation of Public Utilities in Australia Privatisation of public utilities is generally good in the sense that the act of allowing the private sector to participate in producing or offering utility services to the public attracts more competition in the local market. By increasing the number of private sectors who are capable of supplying the utility needs of the people, competition between two or more private firms that provides the same product and services to the public is likely to occur. As a result, the local people and immigrants will have the bargaining power to select their preferred utility provider based on the quality of product and services being offered aside from the cost of using the said utility. Therefore, private sector(s) that operate public utility will have to compete with one another by offering high-quality customer service, outstanding quality product, and offering the service at a more competitive price. With regards to privatization, Aulich & OFlynn (2007) explained that Australian government does not totally end its power in controling the activities behind a particular public utility since the government will always have the power to control and regulate the prices and operations of public utility providers. However, this is not always the truth. For instance: The plan to privatise the Queensland Rail’s (QRs) coal haulage business triggered a strong opposition on the part of the public rail transport group. (Howells, 2009) This is primarily because of the possibility that privatising the QR could result to the significant increase in the market prices of coal. As soon as the QR has been privatised, there is a strong possibility for the new private sector owner will gradually increase the price of coal. In the end, it is the general public especially those who make use of the public rail transportation who will have to have pay more. Conclusion The common reasons why the Australian government decided to privatise some of its public utilities is because of: (1) divestment of public enterprise; (2) outsourcing of the delivery of public services; and (3) the increase in the cost recovery by the government agencies. Basically, privatisation of public utilities in Australia can be considered as a good political strategy in terms of being able to provide the general public with affordable and good quality utility services provided that the Australian government has a strong control over the private sector through a strict pricing and quality service regulation. *** End *** References Aulich, C., & OFlynn, F. (2007). From Public to Private: The Australian Experience of Privatisation. The Asia Pacific Journal of Public Administration , 29(2), pp.153-171. Howells, M. (2009, June 9). ABC News. Retrieved July 12, 2009, from Qld Opposition predicts higher rail charges under privatisation: http://www.abc.net.au/news/stories/2009/06/09/2593112.htm?site=news ILO. (2001). The Impact of Decentralization and Privatization on Municipal Services, Report for discussion at the Joint Meeting on the Impact of Decentralization and Privatization on Municipal Services, 15 - 19 October. Geneva: International Labour Organization. Reserve Bank of Australia Bulletin. (1997). Retrieved July 12, 2009, from Privatisation in Australia: http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_dec97/bu_1297_2.pdf Strachan, G. (1998). Retrieved July 12, 2009, from ‘PRIVATISATION and Telstra’: http://www.gwb.com.au/gwb/news/economic/telstra.html Read More