There’s nowhere near enough evidence in the public domain for a proper evaluation of the announced privatisation of NSW electricity, but there’s enough to do a quick retrospective evaluation of the last such proposal, under the Carr government in 1996 and 1997. At the time, estimates of the sale price for the whole industry (generation, distribution and retail) were “up to” $22 billion (an overoptimistic figure based on extrapolation from Victoria). If entirely used to repay debt (unlikely, this is NSW after all!) that would have saved the government around $1.5 billion per year. Instead the government got dividends of around $1 billion a year, and also extracted at least $5 billion in special capital repayments. So, the total stream of payments was about the same, and the present value was, if anything, a bit higher since the capital repayments came early.

Coming forward to 2007, the government looks set to get more than $15 billion for generation and retail alone, even with a range of restrictions that would reduce the sale price substantially. In general, distribution accounts for at least half the value in the industry, implying a value upwards of $30 billion.

Short analysis: By not selling in 1997, the public lost nothing in terms of cash flow, and accrued at least $8 billion in capital gains.

Having been active in Australian policy debate for around fifteen years, its sobering to realise that I can only identify one issue where I’m confident I’ve had a significant impact on the ultimate outcome. That topic was the subject of my first column in the Financial Review, called Fightback without the Food Tax (for those who weren’t around at the time, Fightback! was John Hewson’s manifesto for the 1993 election, centred on a GST). Not only did Hewson eventually incorporate an exemption for food in his GST proposal (too late to turn around the perception that he was a dogmatic ideologue) but the Democrats accepted the view and imposed it on Howard. This was something of a Pyhrric victory as far as I was concerned, though. While I thought, and still think, a GST with an exemption for food made good public policy, the New Tax System package as a whole was not a good deal and should have been rejected.

At a much more marginal level, I think one of my columns might have had an impact on the campaign this weekend. In this piece in mid-September, I argued that the Howard government had plenty to gain, and nothing to lose, from ratifying Kyoto. Now it turns out that, at about the same time, Malcolm Turnbull was making the same case in Cabinet, unsuccessfully of course. The leak of this revelation has given Howard another day or two of bad headlines. Of course, the argument is obvious, and Turnbull is quite sharp enough to work it out for himself. Still, it does make the effort of turning out a column every fortnight seem a little bit more worthwhile.

All the econobloggers have been waiting for someone else to dive into the analysis of the tax policies offered by the government and opposition. Finally, Andrew Leigh has got sick of waiting and produced a distributional analysis. Bottom line: as you would expect, only marginal differences, except at the top percentile of the income distribution. Labor’s education credit makes its policy very slightly more egalitarian.

I’ve been meaning to work through the MYEFO and talk about the fiscal soundness or otherwise of tax cuts on this scale, and I’ll try to get to this next week.

A reader writes

‘Im about to assume duties as Treasurer of my local church and have found that our reserves are not diversified but are with one institution already in the news as possibly suspect. The outgoing Treasurer is convinced that bank (ADI) deposits are guaranteed by the Reserve Bank and is resisting diversification. My reading of the Reserve Bank site, the APRA site and the modified Banking Act suggests that this “protection” was done away with by changes introduced by the Howard Government and that the claimed “protection” is an urban myth. Hence could you, or any of the readers of your blog advise – are deposits with ADIs protected in that someone will repay them in the event of institutional failure? and if not what should church (and club) treasurer’s do to protect these investments (many people in my position fail to realise that they can be personally liable for any losses)?

My response is that there is no explicit guarantee of deposits, although there is a strong expectation that the Reserve Bank would protect depositor. Unfortunatley, it is not entirely clear which deposits would be guaranteed, which makes life tricky for people like my correspondent. I don’t think there ever was an ironclad guarantee but it’s correct to say that the changes associated with the establishment of APRA moved us further away from such a situation. Coincidentally, the editorial in today’s Fin discusses this very topic, noting that Costello has been sitting, for the last two years, on a report recommending an explicit guarantee, limited to $20 000. I must have missed the whole thing, as I don’t remember any movement on this issue since the Wallis Committee.

Here are some thoughts from 2002. An extract

the medical insurance panic would be nothing compared to what might happen if, in the midst of a liquidity crisis at a major bank, one of our socially responsible talk-show hosts suddenly discovered that there was no government guarantee for bank deposits. This happened on a small scale in the 1970s, forcing NSW Premier Neville Wran to take a loudhailer into the streets to stop a run on a building society.