After 30 years of infrastructure privatisation in Australia, it’s time we put critical utilities (Energy, Water, Telecoms, Rail, et al) back in the hands of the public. While this may sound somewhat draconian and even semi-communist, right now it is the most capitalist move we could make, and our future depends on it. I spoke about it today on radio – you can listen here.
An Infrastructure Reset – Show me a rich country, and I’ll show you rich infrastructure. It’s what modern economies are built on and always will be. We are currently moving through a 200 year shift which involves an entire reset of the physical world around us. In telecoms we are rapidly moving to optic fibre and 5G. Energy is shifting away from coal to renewables (primarily solar) and we need to build out an ‘energy internet’ to replace our ageing grid. All cars will be electric in 8 years time and we’ll require highly distributed charging facilities where ever a car parks. Every economy in the world, that wants to compete globally, must now build out, connected, post industrial infrastructure.
Natural Monopolies – There are certain things which are what economists call Natural Monopolies. These are industries where the most efficient way to serve a market is with a single operator or system. This is most often the case with large national based infrastructure. For example, it doesn’t make any sense economically to have 2 competing sets of national railways alongside each other, to have 2 sets or power lines, or wireless competitive 5g towers serving the same geography. This idea isn’t new, and goes way to back to Adam Smith and the Wealth of Nations. And while it would be dangerous to have infrastructure businesses that are privately owned not to having any competition, if they’re publicly owned, and regulated we can remove problems associated with monopoly operators.
Competing interests & political instability – When things like ‘energy‘ are owned by private firms, their imperative is maximise profits and serve their shareholders, not their customers. At a time when we should be shifting to new forms of infrastructure, privately owned utilities create misaligned incentives in the market place. This will be to our long term detriment in the Australian economy. The NBN is a classic example. At a time when NBN is being rolled out (public), it has to compete with the 5G networks of Telstra (private). If we had a single telecoms infrastructure provider, we’d have a chance to build out a singular, worlds best network. Instead, what we have is a piecemeal financial basket case. We, the tax payers, are the losers.
I truly believe the leadership crisis we are currently facing in Australia (today and over the past decade), is partially because of the problems of vested interests trying to influence the public policy. We have a population that want to move towards renewable energy, yet factions within political parties are influenced by the coal lobby and short term financial interests. The net result is that leaders can’t make the decisions they need to for a future proof economy and we end up with a dysfunctional government.
The benefits of publicly owned utilities – Crucially, this idea isn’t something which sounds fanciful, but just isn’t possible financially. The investment markets have already priced in the truth of what I’m talking about here – that is, the cost of many infrastructure assets are at all time lows. Telstra has a yield of 7% and new coal fired power plants are literally un-investable. Hence, these infrastructure assets could be taken back into public hands at, or below the cost of capital to acquire them. If we did this, the Government would have the ability to build out what the people actually want, and what the future needs. These renewed Government owned enterprises could serve as future employment training grounds in critical skills arenas and we could re-engage our long lost technical apprenticeship model of employment. And let’s not forget that having infrastructure which is world class would facilitate startups to compete globally. This would benefit both the tax base (remember the Gov has a 30% Joint Venture with every business via tax) and open up export potential. What we learn building this out, could then be built in other countries. (software & hardware)
This program might be something we just need to do for 20 years before going private again. But what is clear that our telecoms are a mess, our energy system is a mess and we need new infrastructure quickly if we want to remain wealthy and relevant.
Just this week I was in Sri Lanka and they already have 5G well underway. Emerging economies are building out tomorrow, while wealthy countries like Australia mess around with yesterday’s technology to keep the rich and influential happy. It’s the great squander of our times. One of the reasons the government won’t serve us in Australia, is that we don’t own the assets the decisions are being made around. Maybe if we took the assets back, they’d have to make sure they run these industries properly or they wont get voted back in.
Radical times, require radical action.