Privatisation in Australia: Understanding the Incentives in Public and Private Firms

Privatisation has been an important tool of government policy in Australia and overseas in the last two decades. We explain recent contributions to research in privatisation, and apply a simple framework to ownership policy in a wide variety of Australian cases, including prisons, airports, Telstra, water and gas distribution, and ambulance services. The framework is not limited to these applications, and is aimed at providing a starting point for policy makers in their assessment of alternative ownership regimes. Our analysis is supportive of other authors, who have cast doubt on the wisdom of prison privatisation, and we extend this conclusion to ambulance services and the disposal of highly toxic waste. Application of our framework also suggests that Australian privatisations may have involved excessive separation of assets. The framework also provides a basis for arguing that a key monopoly component of Telstra—the ‘wires’ component—be kept in public ownership, and access auctioned to service providers. We consider the possible pitfalls of corporatisation policy, and argue that corporatised entities may operate to improve the appearance of success at the expense of the reality.