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What is privatisation?

Usually, when people talk about privatisation in a political sense, they generally are referring to the process of an enterprise, business or organisation owned by the government (like an electricity grid, buses or prisons) becoming owned by a non-government party. If a government decides to privatise sectors or businesses, the justification or reason given is to (generally) save money and increase efficiency, while also achieving growth and productivity. However, there are instances where this does not happen, or prices for consumers still nonetheless rise. 

An easy way to understand privatisation is to look at it in the sense of ‘public sector’ and ‘private sector’, and what happens when a business moves from being one to the other. 

Privatisation results in less government intervention in the economy, which is generally associated with conservative political parties. However, this is not always the case (we’ll look at some examples of this later on). 

Those critical of privatisation suggest fundamental services like education or health should not be driven by profit. A government-owned organisation is ultimately answerable to voters in an election. A private company is answerable to shareholders. Some critics will argue that this change doesn’t align interests to the public good. For example, a privistiased utilities company’s primary objective is shareholder profit, not the lowest price of electricity to the taxpayer.  Other criticisms include employment consequences, monopolies in sectors and concentration of wealth.

What is an Australian example? 

In the 1990s, Australian Governments, both Commonwealth and State, privatised a significant portion of the public sector, Since then, a lot of privatisation occurred in financial services, electricity and gas, and transport and communication.  

The Commonwealth Bank was privatised in three stages, beginning in 1991 and was fully privatised by 1996. The privatisation of the Commonwealth Bank happened during the Bob Hawke-Paul Keating Labor Party Government. Despite privatisation not being a typical or popular policy of the Labor Party, the Hawke-Keating Government privatised a variety of businesses and sectors, including Qantas. The justification from the Hawke-Keating Government for privatisation was to modernise and open the economy to international markets. 

Another example of privatisation in Australia was the sale of Telstra, which was also once upon a time a state-owned enterprise, and was privatised starting 1997, under the Howard Government.  

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