The Victorian National Party has joined the push for renationalisation, specifically with respect to the rail freight network sold off when they were part of the Kennett Coalition government.

Advocating a return to government control of the state’s rail freight network, Mr Ryan said obtaining the 45-year lease from private operator Freight Australia would simplify upgrading and maintenance issues.

“Freight Australia are very reluctant to make any further capital investment, because they don’t see themselves as getting an appropriate commercial return,” Mr Ryan said.

“And we need the work to be done.

As I’ve pointed out before, the issue of rate of return is crucial. The difference between the commercial rate of return required under standard financial models and the real rate of interest on government bonds (the ‘equity premium’) is very large, even though economic theory says it should be very small. Hence, the use of the commercial rate for the evaluation of infrastructure investments will lead to suboptimal levels of investment. This fact has been obscured by the atmosphere of optimism that surrounded privatisation, but it is now coming to the fore. In the end, we will face a choice between high costs and inadequate investment.

Of course, the National Party is probably reverting to its historic preference for a zero rate of return, but I’ll be happy to meet them halfway.