Yes, the federal government listened to the people and scuttled the sale of its 13 per cent share in the Snowy Hydro Corporation, and NSW reluctantly followed. But if you consider the statements by relevant ministers, you will find a farrago of deception. Most people will not care: but those who do not want the end to justify the means should care.
Then the NSW government did a volte farce on the Sydney Cross City Tunnel by announcing on Sunday – don’t ministers watch football? – a decision to set aside its agreement with the tunnel owners and re-open city roads. Now we cannot trust the government, even when it has contracts.
First to the Snowy. You will recall that NSW announced in December its decision to sell its 58 per cent of the Snowy Hydro Corporation. That announcement was made without the formal support of the Commonwealth or the Victorian government. As the prime minister, John Howard, said on Friday, NSW made a unilateral decision. But this does not explain why the NSW premier, Morris Iemma, blamed Howard for scuttling the sale.
It is more plausible to argue that while the federal and Victorian governments had not given any formal undertaking, they gave a wink, a wink which was taken to be as good as a handshake. So, when NSW announced its decision, it was not surprised to hear the responsible federal minister, Nick Minchin, defending the sale decision in early January. A month later, the federal and Victorian governments formally hopped aboard. This was very efficient decision making, unless the ground had already been prepared.
If there was no implicit understanding, then Iemma should be condemned for blaming the Commonwealth for scuttling the deal. If Iemma could start the sale without Howard, he could finish it without him.
As to the Commonwealth, when the politics of the Hydro sale got nasty, it blamed NSW. The federal Minister for Agriculture, Fisheries and Forestry, Peter McGauran, made this clear last week, before the plan was aborted: “once the New South Wales government’s decision to sell its 48 per cent (sic) stake in the scheme was made, it was inevitable and unavoidable that the Commonwealth would also have to sell its 13 per cent stake. The retention of a 13 per cent share in a commercial company by the Commonwealth was not practical nor (sic) fiscally sensible. It is too small to have an impact.” Was this the whole truth? No.
The Howard government had announced its intention to sell its Snowy Hydro shares as far back as 1997. Moreover, the three governments agreed when the scheme was corporatised that each would have an equal say in the control of the company. That is, while the Commonwealth had only 13 per cent of the shares, it had a third of the say. Had the Howard government insisted on maintaining this agreement, it would have controlled Snowy Hydro after the two states had sold their shares.
As a side issue, you can see from the auditing arrangements – Snowy Hydro is audited by a private sector firm – that NSW does not control Snowy Hydro, in spite of its majority shareholding. If it did, state law would require NSW’s auditor-general to be the auditor. It is a pity that ministers neglected to tell the public about this control issue.
Now to roads. Requiring some roads in urban areas to be tolled while the bulk of the network is toll-free cannot be justified, either as good public policy or as economically sound. If Iemma said this, he would do NSW residents a favour. The state could then develop a policy to unwind toll deals with the consent of the private owners who would receive fair compensation.
But Iemma’s unilateral decision to re-open public roads in spite of contracts is neither about good policy nor sound economics. For a start Iemma’s action raises the spectre of sovereign risk. This occurs when governments use their power to negate contracts which they do not like. True, NSW has not sought to pass legislation negativing this part of its contract with the Sydney Cross City Tunnel company. That would be stupid. Instead, the government has shown that politics comes before contracts. That is still very silly.
From today’s Australian Financial Review
One thing that I never did see explained to me is, why does the Federal Government’s 13% shareholding give it a veto on the NSW Government’s sale of the 58% shareholding. Is there some statutory reason why this is so?
From reading the post, presumably just a matter of contract.
If they had been that serious about it, they would different classes of shares, but I didn’t see any reference to that in the lead-up to the sale. Perhaps the Cth had shares with 5 votes but that could only vest 1 vote in a purchaser? Any number of ways to do it, in fact.