Thursday, June 01, 2006

World: The Snowys: privatising a major community resource

I was accosted today by saturation advertising, encouraging people to register for shares in Snowy Hydro Limited. It's sad to see Australian governments* collude to sell off this essential piece of infrastructure.

This is a hydro-electric and river diversion system – one of the biggest in the world - that provides a massive amount of renewable electricity (over 32,000 Gigawatt hours per year at capacity), and thence governs distribution of a very important – and contentious - water resource.

On sentiment alone, the Snowy Mountains Scheme is a crucial part of Australian history. From 1949 to 1974, thousands of new migrants toiled on it, in the process finding their place in Australian culture, proving themselves as Australians. Over 100,000 people worked on it over those 25 years, and 120 people died on the job. I cannot say enough about how important to Australia's growth as a nation - both economically and culturally - the successive waves of migration have been.

However, history is history, not an argument for public ownership. It is as an essential infrastructure resource – controlling seven power stations, 16 dams, and a significant amount of renewable energy and water resources - that its control should be in the hands of the people. Legislation alone cannot provide sufficient oversight of the complexities of these resources, and the communities of both people, flora and fauna that it directly affects.

As a sop, there has been some legislation to cap foreign ownership. This will have no practical effect, as private hands have the same profit imperatives, whether those controlling it live overseas or not.

Opposition to the sale has come from both community and prominent Australians, including Justice Marcus Einfeld, ex-Reserve Bank governor Bernie Fraser, and ex-PM Malcolm Fraser. There’s also some adverse legal advice on the constitutionality of the sale. For what it's worth, a Herald online poll showed 85% opposition, at last count.

I'll also add here an alternative perspective from the Herald’s business writer Alan Kohler, who depicts Snowy as a hedging company rather than a marshaller of resources. One could also argue that its fortunes depend on rainfall, which will probably decrease with global warming. Kohler says the water resource is only a "rented" commodity, but that doesn't stop it becoming a political football, with the sale increasing pressure for commercial (rather than community) outcomes.

Still, I remain quite concerned that legislation is not a sufficient instrument to ensure that Snowy’s water, electricity and other infrastructure resources are marshalled for the benefit of the public. Shareholder interests and public interests do not generally coincide.

*The Snowy company is currently in joint ownership of the federal, Victorian and New South Wales governments – surprisingly, it was the latter (the majority shareholder) rather than the former that initiated the sale process.

2nd June: Federal backdown
Some quite exemplary political opportunism from both the NSW and federal governments. NSW premier Iemma stood resolute on the sale, claiming "we need the money for hospitals" (oh, so you wouldn't be properly funding hospitals were it not for the sale?). For the federal government, John Howard said he was responding to public concern, and withdrawing sale of their 13% share. Of course, that rump portion is good for nothing, and will be very quietly sold off once the furore has abated. Of course, Howard wins the prize here for biggest political effect for smallest cost.

4th June: The sale is off
The NSW government followed the federal lead, and the sale is off. I must say, I expected them all to weather the storm but federally, Howard's got quite a few shaky electorates that could be affected by this, and NSW's due for an election next year, so nobody wanted unnecessary voter aggregation. The Victoria government followed suit.
All in all, a good result for public activism - for the moment. We can still expect the NSW government to try to put it back on the table later. Once started, pushes for privatisation never seem to go away.
A couple of minor questions:
1) Who backed down first out of NSW and Victoria? Probably not important, as Victoria was only acceding to everyone else's plans.
2) What reason did the NSW government give for abandoning the sale? They could still have proceeded without the 13% federal share on the table.

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