Out of the mainstream

I managed to get something of a response from the Queensland Treasurer, Andrew Fraser to my critique of the case for privatisation put forward by the government. Fraser says

The global financial crisis has ripped a $15 billion hole in the state budget. There is no evidence to suggest the state is about to see that hole repaired despite the marginal turnaround in the economy.

“The fact is, Queensland will be better off.

“The myth is that John Quiggin represents the view of mainstream economists.

“The Government is not undertaking this process for the fun of it.”

A couple of responses.

First, the sale of $15 billion of assets does not in any way resolve a $15 billion shortfall in income (the “hole” in Fraser’s statement). The sale value of $15 billion (assuming it’s realised) represents the private sector valuation of the earnings from the assets. Perhaps (though this hasn’t been shown) the value in continued public ownership is less than $15 billion, but it can’t be much less. The coincidence between the two numbers is, intentionally or otherwise, deceptive.

Second, if Fraser is right, it ought to be easy to find mainstream economists to agree that his comparison between last years dividends to general government and the $1.8 billion interest saved (mostly by the GOCs) themselves if the assets are sold and $12 billion of investment is foregone. Any takers?

Finally, it’s worth asking why the government is doing this. My guess is that they place much more weight than they should on the AAA rating, and that Treasury is still pursuing the ideological goals of the 1980s and 1990s.

32 thoughts on “Out of the mainstream

  1. @melaleuca
    Well Id sure like to know why underemployment and unemployment has been rising for about the same three decades as exec remunerations. I think there is a whopping big rigidity at the top of the labour market.

  2. What Id really like to know is when, exactly, is the invisible hand going to giveth instead of taking away?

  3. Mr Fraser seems to like the snarky response. It is a pity because i have heard that he is supposed to be intelligent – he obviously doesn;t like to demonstrate it. Excerpt below from Nicole Butler on ABC.

    “ANDREW FRASER: Professor Bob Walker who the QCU have hired to provide this advice provides low rent, rented advice that suggests that there is an endless ability for any government anywhere in the world to continue to go into more and more and more debt.

    He has views which are not in accord with reality and professor Bob Walker isn’t a credible part of the debate.

    BOB WALKER: That’s a pretty immature comment from a public officer I would have thought. I mean, I’d prefer instead of paying the man he actually engaged with the issues and the facts that were presented. I mean I’m not sure he fully understands accounting.

    NICOLE BUTLER: Professor Walker has previously sat on advisory committees for the Commonwealth Auditor General, chaired a commission of audit of state finances in New South Wales and he’s also spent nine years as a chairman of a state owned corporation.”

    full interview is at http://www.abc.net.au/worldtoday/content/2009/s2747556.htm

  4. @Alice
    Alice, i was suggesting that perhaps this is the argument that the government has in its head. Perhaps government think that we would rather have the private sector run the state because both options are negative, but that the private sector would be a lesser evil.

    Personally I am yet to see a justification of the sales that makes sense from a taxpayers perspective. I have heard lots of reasons why Treasury like it (bureaucratic power), why the private sector like it (they make money), why lots of advisors like it (they make money) and the politicians like it (makes it look like they are making tough decisions – they cant think of anything else – their advisors like it).

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