PRIVATISATION

CONCEPT, ADVANTAGES &

DISADVANTAGES

MR. KIRANPAL SINGH

PRIVATISATION
Privatisation is the transfer of activities from
the public sector (ie: government owned
and run) to the private sector.
Not all Government Business Enterprises
(GBEs) may be privatised, this is because
some provide a service and do not have
profit potential.
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ADVANTAGES OF
PRIVATISATION
Privately owned firms are usually more
cost efficient than public because of the
profit motive. There are several examples
of unprofitable GBEs which have to be
subsidised by taxpayers funds, for
example: Australian National Railways.

ADVANTAGES OF
PRIVATISATION
Privatisation places risk in the hands of
the owners of the business, rather than
the community as a whole. Therefore, a
profit making tax paying company is not a
burden on the community, but an asset to
it.

ADVANTAGES OF
PRIVATISATION
Privatising government business may
make it less subject to red tape and more
innovative and responsive to consumer
complaints.

ADVANTAGES OF
PRIVATISATION
Some claim government run
businesses have an unfair
advantage over private
competitors. They have
guaranteed payment of bills,
for example: until 1988
Telstra was exempt from
payment of customer duty
and sales tax.
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ADVANTAGES OF
PRIVATISATION
Theorists would agree that one strong
reason for privatisation is to reduce the
situations in which the government is both
a player and an umpire.

ADVANTAGES OF
PRIVATISATION
Privatisation has a once off
advantage, ie: the sales
add to that years revenue
alone. This advantage
should not be overemphasised as it is a once
only situation, a benefit, but
not a reason for it.
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ADVANTAGES OF
PRIVATISATION
Consumers of the goods and
services produced by the
privatised enterprise would
gain from the lower prices and
greater availability of the
product, as a more cost
efficient private operator can
pass on these efficiency gains
to the market.
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ADVANTAGES OF
PRIVATISATION
Where competition increases product
differentiation, consumers will also be able
to choose the good or service most suited
to their needs.

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ADVANTAGES OF
PRIVATISATION
The private sector would
take over a greater
range of commercial
activities, but would use
less resources than the
public sector. This
would free resources for
other purposes.
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ADVANTAGES OF
PRIVATISATION
Improved private
sector profitability and
its expansion would
generate greater tax
revenue through
growth of the
economy rather than
through increased tax
rates.
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ADVANTAGES OF
PRIVATISATION
Taxpayers would gain to
the extent that public
service losses and
inefficiencies would no
longer be financed from
taxation revenue.

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ADVANTAGES OF
PRIVATISATION
In matters of finance, public
sector managers are often not
free to make important decisions
such as the amount of capital
they will raise or what they will
charge for their services.

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ADVANTAGES OF
PRIVATISATION
A private sector board, by contrast,
operates with much more flexibility and
relevance when making financial
decisions.

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ADVANTAGES OF
PRIVATISATION
Many management practices are determined
by rules set down by centralised authorities,
such as the Public Service Board. In the view
of many, the Australian Broadcasting
Corporation is virtually unmanageable under
the present rules. Even if it had a perfect
board and management it would still have
problems.
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ADVANTAGES OF
PRIVATISATION
In personnel management, for
example, management is not
free to hire and fire or to pay
by performance and result.
In industrial relations, the
Public Service Board controls
the major negotiations.
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ADVANTAGES OF
PRIVATISATION
In marketing, in many
cases public sector
enterprises may not
move into new
products or markets
without government
permission.
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DISADVANTAGES OF
PRIVATISATION
All government firms carry a service which
does not make a profit but provides a
service. Some of the services would be
lost when privatisation occurs.

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DISADVANTAGES OF
PRIVATISATION
Sale of Transperth (State bus
authority divided into private groups in
regional basis) may mean outlying
areas receive little or no service, or
Telecom being privately owned could
mean timed local calls. Australia Post
could charge higher rates to send
mail to other states or country areas.
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DISADVANTAGES OF
PRIVATISATION
Transfer of a public asset to private
owners means the community might have
less say about the direction of the
company.
Privatisation may cause loss of jobs if the
new owners feel the numbers of workers
are inefficient.
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DISADVANTAGES OF
PRIVATISATION
The sales of assets must be accomplished
under the right conditions. Sale of GBEs
at too low or too high a price is not
beneficial to the community.

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DISADVANTAGES OF
PRIVATISATION
Most people are concerned at
the possibility of a private
monopoly establishing, for
example: sale of Australia Post.
If this was to occur then services
would be seriously reduced in
remote areas.
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