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Privatisation debate exposes Costa's hypocrisy and incompetence

Upper House Liberal leader Michael Gallacher's speech against electricity privatisation

See also: comment below and Duncan Gay's speech

The following speech has been copied from the NSW Legislative Council Hansard of 27 August 2007.

The Hon. MICHAEL GALLACHER (Leader of the Opposition) [12.44 p.m.]: The Government has had 13 years to get the important issue of this State's future power generation right and, as members will shortly hear, it has got it wrong. The New South Wales Liberal-Nationals Coalition will not support the Iemma Government's Electricity Industry Restructuring (Response to Auditor-General Report) Bill and the associated cognate bill. The Liberal-Nationals Coalition does not take this decision likely. There are three key reasons for our dissatisfaction with this proposed electricity industry restructuring: the continued uncertainty surrounding the Commonwealth Government's emission trading scheme; the current state of capital markets is not conducive for the sale of such a valuable asset; and the Iemma Government's history of financial and infrastructure delivery mismanagement and incompetence. Underpinning all three reasons is the fundamental issue of trust. The community does not believe that the Government can be trusted to get this privatisation right. The community does not believe that the Iemma Government can be trusted to spend the proceeds of the sale in a transparent and honest manner. The community also does not believe that the Iemma Government can be trusted to put public interest ahead of the Labor Party's re-election plans.

The community's concerns are well founded. The 2007 State election did not deliver the Iemma Government a mandate to embark upon the sale of this State's electricity assets. In fact, the Iemma Government issued emphatic denials that any such sale would take place. The arrogant dismissal of concerns held by the Government's own members and its party, whilst contemptible, is not surprising. The Government's failure to put the question to the people of New South Wales demonstrates beyond any shadow of a doubt that this is a Government out of control, out of step and out of options. Mr Iemma betrayed the trust when he refused to reveal his true plan about the future of electricity prior to the 2007 State election. By opposing this legislation the New South Wales Liberal-Nationals Coalition will ensure that the people of the State are not betrayed.

The Treasurer's ever-shifting position on the privatisation of electricity portrays him as a political opportunist. As an executive member of the Labor Council he opposed the privatisation of electricity. On 12 February 1998 as Acting Secretary of the council he moved the following executive recommendation:

That …the Labor Council reaffirms its opposition to the Egan Electricity Privatisation Proposal.

At a Labor Council meeting on 21 October 1999, in his position as Secretary of that council, he moved the following executive recommendation:

That …the Labor Council continue its campaign against contracting out of Government employees' work and jobs.

As well as opposing electricity privatisation the Treasurer has also spoken of the need to put social concerns above market fundamentalism. In his inaugural speech to this House in September 2001 he spoke of what he imagined as a better world:

While it is true that I respect the power of the market mechanism, I reject market fundamentalism, which places all market outcomes above social concerns … Societies structured on markets that do not deliver social outcomes supported by the majority of the community are doomed to failure.

Perhaps the Treasurer should have considered his own advice before bringing this legislation to the Parliament. In addition to those sentiments in his inaugural speech, he said:

Barrie Unsworth advised me that this inaugural speech was an important speech because it provides a public benchmark to judge one's contribution to public life. I hope that at the end of my time in this House I will be judged as having contributed to prosperity, opportunity and fairness.

As I said earlier, the Treasurer is a recent public convert to the "privatisation at all costs" agenda. As late as before the last State election—in this House on 23 November 2006—the Treasurer said:

There is no energy crisis in New South Wales … In fact, New South Wales has surplus energy.

A month out from the State election, on 20 February 2007, he was reported in the Australian Financial Review as saying:

There are no plans to sell our retail electricity businesses.

Yet here we are in an extraordinary sitting of this Parliament, having been recalled at great expense to the taxpayer, to pass legislation to privatise the electricity assets.

That I stand shoulder to shoulder with my Coalition colleagues, the Nationals, and accuse the Government of betrayal is not political rhetoric. The Government's Ministers pledged that they would not sell our State's power in any restructure, but not 12 months later, in a backflip, they and announced that they would. That is a betrayal. The Treasurer does not have a monopoly on opportunism when it comes to electricity privatisation. In the other place on 9 May 2007 the Premier said, when referring to the Owen review:

The Government goes into this review with an open mind, and only two things will be ruled out. The first is nuclear power. As I have stated previously, there will be no consideration whatsoever of nuclear energy for New South Wales. Second, there will be no sale of electricity generation, transmission or distribution. On all other matters I am yet to be convinced and will await Professor Owen's expert advice.

The Premier even has been accused of lying to Unions NSW. In a Sydney Morning Herald article dated 25 May 2007 he was reported as stating in a letter to Unions NSW:

The privatisation of the State Government-owned energy companies is not on our agenda. In fact, the NSW Government's commitment to this sector is stronger than ever … with record investment in new and upgraded electricity infrastructure.

I reiterate: This represents a betrayal of trust. It is a lack of trust that underpins the Coalition's opposition to these bills. While such significant uncertainty surrounds the creation of the proposed emissions trading scheme, New South Wales's taxpayers cannot be confident they are receiving full value for their assets. My colleague the Deputy Leader of the Opposition in this House, the Hon. Duncan Gay, will further outline our concerns regarding the Federal Government's emissions trading scheme.

The great disappointment in all of this is that rather than engage in a constructive conversation with the Rudd Government, Michael Costa has wasted time threatening Labor rank and file and berating the Opposition. When the bills are rejected by this House, responsibility will fall squarely at the feet of the Treasurer. From the outset he misled the community, isolated his colleagues and politicised the process. The Treasurer has failed to show leadership. Leadership is about engaging the community in open dialogue, leadership is about asking the hard questions, and leadership is about inspiration and bringing people along on a journey toward a desired outcome. At no point has the Government engaged the New South Wales public in anything resembling leadership consultation. Conversely, it has betrayed and engaged in spin, and in this House it will pay a hefty price for its hubris.

The proposal to privatise electricity does not meet the public interest test. In so many ways Australia's capital market conditions are not conducive to a positive outcome for the people of New South Wales. Since the release of the Owen report in 2007, Australian stock markets have fallen significantly. The Australian All Ordinaries fell almost 20 per cent, and the Australian utilities sector index fell almost 30 per cent. The impact of falling markets is clearly evident in the Hon. Michael Costa's consistent downward revision of the value of the assets. In December 2007 the Treasurer described a $15 billion price tag as conservative. In June 2008, he estimated the price at "around $10 billion". If a public company mysteriously lost $5 billion off the value of an asset in the space of six months, the Australian Securities and Investment Commission would declare an immediate audit. I point out that $5 billion is equivalent to the cost of 5,000 hospital beds or 130 new schools.

Importantly, the negative impact of capital markets will not be limited to initial public offerings; it will also affect trade sales. Market multiples will be used as a part of any basic valuation for a trade sale. Furthermore the global credit crunch makes it more difficult for companies to secure debt funding. My colleague in the other place the member for Manly estimates that the cost of underwriting $10 billion in current market conditions is $400 million more than at the same time last year.

The Iemma Government has spent the last week trying to make the future of its electricity plans all about the Opposition. The Treasurer has made numerous claims about why the Opposition should support the legislation—claims that simply do not stand up to scrutiny—and says that the Owen report found that $15 billion needs to be spent on electricity infrastructure. However, he is yet to explain why spending on electricity assets has been so neglected and why allegedly we need to come up with $15 billion by 2013. We reiterate that even as late as before the 2007 State election on 23 November 2006 the Treasurer stated in this House, "There is no energy crisis in New South Wales … In fact, New South Wales has surplus energy."

Responsible government is about planning for the future and anticipating the need for the replacement and ongoing maintenance of assets, particularly major assets such as power stations, hospitals, schools and police stations. The Treasurer claims that the details of the Commonwealth's emissions trading scheme will be clear by the end of the year, but what he does not point out is that, just as the New South Wales Government does not control its upper House, the Rudd Labor Government does not have control of the Senate. There is no way the Treasurer can be assured that legislation for the emissions trading scheme will be in place by the end of the year or that that legislation, even if it is amended or passed, will operate as intended.

The Treasurer also believes that financial market conditions, now or indeed at the end of the year, will be conducive to the sale of our State's electricity assets. Nobody, not even the Treasurer, knows what the market conditions will be at the end of the year. What we know now is that since the release of the Owen report in September 2007, the Australian stock market has fallen significantly. As I have said, the Australian All Ordinaries fell by almost 20 per cent and the Australian utilities sector index fell by almost 30 per cent. International rating agency, Fitch Ratings, stated:

The final valuation of NSW's coal-fired generation assets will be affected by the details of (the) carbon pollution reduction scheme (CPRS) due to be introduced in 2010. Uncertainty over how the CPRS will affect the electricity generator's cashflows and of the present state of credit markets are likely to affect the value of proceeds.

It should never ever be forgotten that the only reason the Government faces defeat is that it has failed to secure the votes of its own caucus members. This predicament is entirely of the Government's own making. The Coalition's approach to electricity privatisation was never about ticking boxes or meeting deadlines. It has always been about what is in the best interests of the New South Wales community. Our approach to this legislation has not been about the father-knows-best politics of the Australian Labor Party. From the outset, it has been about doing what the people expect of us.

My colleagues in the other place each represent more than 40,000 voters in their respective electorates. The Leaders of the New South Wales Liberals-Nationals involved each and every one of those 40,00 voters in formulating the Coalition's final position. The Hon. Michael Costa and his leader cannot say the same. The Auditor-General's Report and the Rural Community Impact Statement have played an important role in our decision. We also considered a range of factors, including external economic conditions and the current state of flux in the energy sector. The process has involved wide consultation with groups ranging from business interests to energy sector employees and of course the general community.

Ultimately the Coalition decided that the Government cannot be trusted with the privatisation of electricity. Let me echo the words of the State's Leader of the Opposition, Barry O'Farrell, who confirmed this morning that the New South Wales Liberals-Nationals will have an energy policy to put to the people of New South Wales before the next election. Our policy will include the principle of private sector involvement where it meets the public interest. It will consider the broadest range of methods that deliver to the public the best outcomes in electricity. What our electricity policy will not be is the singular agenda of an individual member of Parliament who is intent on rushing through a fire sale of the State's most valuable asset.

Much has been said in the press concerning the effect that this decision will have on the Coalition's relationship with the business community. Irrespective of what some business groups might think about the role of private enterprise in electricity generation, most members of the business community would agree that the Government cannot be trusted with even the most basic economic endeavours, let alone something as substantial as electricity privatisation.

Ultimately, the key stakeholders in the proposed sale of the State's electricity assets do not sit in New South Wales boardrooms; they sit in lounge rooms. They open a power bill every three months. They will watch as market forces, both external and internal, affect the retail price of power generation. Some of them will be renters, some will pay mortgages, some will have children, and some will live on a pension.

While the Iemma Government decides how to divide the spoils of its sale across marginal constituencies, these people will decide what to cut from the family budget as the cost of living in New South Wales continues to increase. It should never be forgotten that if this legislation fails today it will be because the Labor Party has split. Two parties with conflicting agendas now run the New South Wales Government. I am proud to stand shoulder to shoulder with my Coalition colleagues The Nationals in condemnation of these bills and the manner in which they have been introduced. Today we oppose legislation that puts Morris Iemma and Michael Costa's interests and quick-fix financial gains above the interests of the people of New South Wales. The Opposition opposes this legislation.

Editor's comment on speech above

Although I am elsewhere highly critical of many other Liberal Party politicians, I found this speech by NSW Upper House Opposition Leader Michael Gallacher to be brilliantly incisive and informative. Thanks to Sheila Newman for having drawn my attention to it. Site visitors should also take the opportunity to read Treasurer Michael Costa's speech in support of the Electricity Privatisation bill in order to form their own judgement. It can be found on the Parliamentary web site. We intend to publish it here when time permits.

Readers should also contrast the damning case against Treasurer Costa and his Government presented here with the craven pro-NSW-Government coverage of electricity privatisation by virtually all the mainstream press, including that given by the supposedly independent ABC.

Why is it that newspapers, such as Rupert Murdoch's Australian which postures incessantly about its struggle to supposedly defend Your Right to Know so rarely report to the Australian public important basic facts about issues - like that of electricity privatisation - which can be readily found in the Parliamentary Hansards of almost every sitting day of the year?

The NSW's State Opposition's stance against privatisation is, unfortunately, not absolute. Ironically though, the NSW public and NSW unionists owe Michael Gallacher, Peter Debnam, Barry O'Farrell, Andrew Stoner and the whole NSW state opposition an enormous debt of gratitude. This is because the state opposition informed the NSW public of the truth about privatisation and the Labor Government record. The opposition then put its words into action. Of course, credit also rightly belongs to the Greens, the minor party and independent members, and those Labor members who defied the unprincipled stance of the Labor Caucus majority to vote against privatisation. Also credit is due to the trade unionists and community grass roots activists who campaigned so hard against privatisation. - James Sinnamon

Uppper House Nationals Leader Duncan Gay's speech against electricity privatisation

The Hon. DUNCAN GAY (Deputy Leader of the Opposition) [1.16 p.m.]: Today we have witnessed the contrast between two leaders: one leader who divided the party and another leader who brought two parties together. Never before have we seen greater contrast in this State. We have a political party that wants to hide in the back rooms of this State and not take decisions to the people. Its members do not want to walk up the front path to the front door of a house, knock on that door and say to the constituents in that house, "This is what we want to do." That party has defied the people's house of New South Wales and has not gone into the Legislative Assembly where the elected members of this Parliament represent the electorates of New South Wales.

We have seen vicarious cowardice on the part of the Premier and his tyrant Treasurer, who is probably already out there with the failed Babcock and Brown hunting for a job. Never before in this Parliament have we seen a greater contrast between those who are willing to listen to the people of New South Wales and act in the community's interest and a group who refuses to do so. That particular group unwisely spent taxpayers' money to recall the Parliament to debate a flawed scheme. The Parliament was offered one option, a flawed option that does not add up with the trading schemes yet to go before the Australian senate.

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The balance of power in the Senate will be held by a small group of Independents, including the newly elected South Australia Senator, Nick Xenophon, the Family First party and the Greens. Who knows what cost that will put on power generation in New South Wales? The Treasurer, in a rare bout of honesty in this House, indicated that cost could be as much as $3 billion. No-one knows what that cost will be out of Canberra. No-one knows what the competing cost will be out of the current fire sale at Babcock and Brown, as it divulges similar interests into the markets in this country.


What has the Government been doing for the past 13 years? Why is it suddenly Barry O'Farrell's fault? For 13 years the Government has had a chance to fix this problem. For 13 years former Treasurer Michael Egan and Treasurer Michael Costa have told Parliament that the New South Wales taxpayers have had a surplus through the good financial management of the Labor Party.

Yet, we were given one option: to support the sale, or nothing! Today in this House, questions must be asked: What has the Government been doing for the past 13 years? Why is it suddenly Barry O'Farrell's fault? For 13 years the Government has had a chance to fix this problem. For 13 years former Treasurer Michael Egan and Treasurer Michael Costa have told Parliament that the New South Wales taxpayers have had a surplus through the good financial management of the Labor Party. Treasurer Michael Costa told New South Wales taxpayers before the last election that they had nothing to worry about. One reason why the people of New South Wales and the Opposition cannot support this legislation is because the Government's Ministers cannot be trusted. Their word is not what they stand for.

The Government promised to fix the roads, it promised to lower hospital waiting lists and it promised to provide extra police, but it has not delivered on one of those promises. Not one Government promise has been fulfilled. The electricity legislation that was introduced today is dead in the water, because the Government did not consult with the people of New South Wales and it gave a flawed plan. The Government has reaped its own revenge. The Government has lost, and it deserved to lose. The contrast is stark—we will go to the people with a proper plan. [Time expired.]

See also: Open letter to NSW state Opposition members urging a vote against electricity privatisation of 28 Aug 08, Open letter to NSW Labor parliamentary caucus members to urging a vote against electricity privatisation of 27 Aug 08

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