My report on the NSW governments proposal to sell (they prefer to say “lease”, but it’s a sale) assets and then undertake a large-scale infrastructure program notionally funded by the proceeds cited the former Secretaries of the NSW and Victorian Treasuries the point that selling income-generating assets does not create a ‘bucket of money’ that can be used to fund non-income-generating infrastructure. I made the claim that regardless of their attitude to privatisation, economists (at least when writing honestly on the subject) would agree with this.
My point was proved, twice over, a couple of days ago. The main point was proved when global bank UBS released a research note headed headlined “Bad for the budget, good for the state“. Of course, UBS supports privatisation, but the adverse effect on the budget was obvious.
However, it turns out that a different part of UBS is advising the Baird government on privatisation. A quick call from the Premier’s office produced a revised version of the note with the offending phrase removed. This proved, via the contrapositive, the parenthetical aside in my claim.
The episode raises the question: what reliance can be placed on published reports from firms like UBS cited in support of government policy? Of course, the same question is equally applicable to reports like my own, which more commonly oppose government policy? A few thoughts over the fold.
First, you can’t learn much from a summary of the conclusions of such a report . There are plenty of banks and consulting firms, with impressive sounding names, who will say whatever the client wants them to say. But even leaving that aside, most experts have a track record which makes their views fairly predictable. For example, a government with a proposal like Baird’s is unlikely to hire me as an expert, while its opposition might do so (for the record, this report wasn’t funded in any way, but I have done consultancies on this issue in the past).
So, there are a few options in dealing with such reports. One is to read them carefully and form your own views. A second is to make judgements over time as to which experts are reliable and which are not. A third is to ignore such reports altogether. In the case of UBS, the last of these is, I suggest the way to go.
A final aside. Here’s the New York Times on UBS “UBS is in a league of its own given its track record for scandals …The bank’s recidivism seems rivaled only by its ability to escape prosecution”
But none of this seems to have any effect on the bank’s standing. When the Abbott government needed a new Treasury Secretary, they went to (you guessed it) UBS.