Changing The Balance

Privatisation: Changing the Balance between the Public and Private Sectors
The government has indicated it intends to include proposals for partial privatisation of some state assets in its election manifesto this year.  It is proposing mixed ownership models for Meridian, Genesis, Mighty River Power and Solid Energy, and a partial sell-down of its shareholding in Air New Zealand. 

The Business Roundtable has long advocated the concept of privatisation on the basis that  private ownership and competitive markets are generally the best way yet found for efficiently producing and distributing goods and services.  There was strong debate in New Zealand on whether government ownership of businesses mattered in the 1970s and 1980s.  This is now a much more settled issue. 

The balance of evidence indicates clearly that government ownership of commercial enterprises is unlikely to be an efficient durable intervention. The raft of studies done over the last three decades shows overwhelmingly that, on average and over time, the performance of privately owned businesses is superior to state-owned ones.

Background
Almost every country has adopted privatisation as a public policy at some stage over the last 30 years.  The World Bank noted that “privatisation is now so widespread that it is hard to find countries not using the approach: North Korea, Cuba and perhaps Myanmar make up the shrunken universe of the resistant.”

New Zealand was in the leading group of countries in terms of privatisation in the late 1980s.  But that has long since changed with the stop-start record over the 1990s, and a complete halt to privatisation and even some renationalisations during the 2000s. New Zealand now lags international best practice in several important areas: accident insurance, broadcasting, electricity, housing, postal services, roading and water.

The Business Roundtable published a substantial piece of empirical research on privatisation in 2002, The Changing Balance between the Public and Private Sector by Phil Barry and has written extensively on the topic.  This page brings together that work and is intended as a resource for those interested in the topic. Similar moves at local government level, particularly port reform, are advocated, and wider moves, such as outsourcing employment placement for beneficiaries should be considered.  It is also intended to promote debate on the topic and greater public understanding of the benefits of privatisation.

Privatisation issues in the news	The Truth about Privatisation - a blog series by Roger Kerr