The New South Wales premier, Mike Baird, has admitted his office contacted a bank before it changed a report that originally said the budget would lose money in the long run from electricity asset privatisation.
Baird said UBS, a key adviser in the government’s proposal for partial electricity asset privatisation, was already going to change the report when contacted by his office.
“The report has come in, obviously we’ve seen it, we’ve touched base, and they were aware the modelling did not take into account the broad economic benefit that comes in over the next 20 years,” he said on Wednesday.
UBS released a report titled “Bad for the budget, good for the state” that said privatising some of the state’s assets could be detrimental to the budget’s bottom line in the long run, according to the Australian Financial Review, which was sent a copy of the report.
The report said that as government increased spending on infrastructure and lost revenue from the assets, the effect on the bottom line would be negative.
The report, written by David Leitch and Andrew Lilley, was recalled and re-released on Tuesday afternoon with the title “Good for the state”. It contained added information which listed benefits to the state of privatisation such as productivity benefits from increased government spending.
The report came as Frontier Economics released a statement contradicting the opposition leader’s use of their report into privatisation. Luke Foley has argued a report by the consultancy showed privatisation caused electricity prices to rise.
Frontier Economics managing director, Danny Price released a statement saying “our analysis showed the opposite to what Mr Foley implied”.
“We found that privatisation will benefit consumers with lower prices compared to retaining government ownership. The reason is that the private sector does not waste resources in providing services to its customers,” he said.
Price said Foley confused comparisons between the price performance of privatised and government owned networks by mixing concepts of price rises and prices levels.
The partial privatisation of the state’s electricity assets is a key battleground of the election campaign with Baird proposing a sale of 49% of the electricity distribution network infrastructure. The sale, vehemently opposed by Labor, has the price set at $13bn.
Baird said the proposal was a “once-in-a-generation” opportunity for the people of NSW.
“That report did not reflect the growth in the broader economy, indeed that was picked up later in the day by that analyst, the important point is that the economy is going to grow by $300bn so that means more revenue coming in the state, not less, let’s focus on the key details of this, we retain full public ownership, we lease 49%, what that will do, the funds that we secure will be invested in the infrastructure we desperately need,” he said.
Foley said it was a “refreshing moment of honesty” for the government’s privatisation advisers to say the policy would “rob the state budget of the funds it needs”.
“Labor’s plan is keeping the electricity network in public ownership in order to deliver the frontline workers, the nurses, the paramedics, the teachers, the police that we need to service a growing population in NSW. Now UBS, the government’s own privatisation advisers, have admitted that the state budget will be hurt if Mr Baird’s privatisation policy comes to reality. You don’t have to accept it from me. Those are the words of UBS,” he said.
“... You wouldn’t have to be Einstein if you’re working over at UBS to know that the report ought to be changed a bit, if you want [to benefit from] privatisation action down the track if the Liberals are re-elected,” he said.
Labor argues there is $1.7bn made from dividends from the assets each year, a figure disputed by the Liberal party which says it is actually $400m.
The NSW treasurer, Andrew Constance, said UBS did not consider “economic uplift” in the original report when asked if the government had requested a change.
“UBS didn’t factor in the enormous economic uplift and the revenue flow to government through stamp duty, GST and payroll tax,” Constance told the ABC.
“We are going to see a $300bn economic uplift to the state as a result of the transaction in the years ahead because we are building congestion-busting infrastructure designed to strengthen the state economy, which is currently experiencing a $500bn economic lag because of congestion.”
Leitch said he believed the original report was advocating for the sale.
“I shot myself in the knee,” he told the AFR. “I genuinely believe in this asset recycling plan. I was naive. Having studied it for so long, I guess that I can see this analytical point that no one else was seeing about the debt. I thought if I wrote all that down on a piece of paper everyone would think that was terrific. That’s what I’ve learnt, not everyone thinks the same way I think.”
UBS has been contacted for comment.
