Sunday, 25 August 2013

Airport gravy train

As we saw with the Hobart Airport HERE, the Macquarie syndicate which included RBF with a 49.5% interest paid too much, which meant after locking in interest rates there was insufficient cash to fund capital upgrades.

Hence Abbott’s offer of a bailout.

Sydney Airport’s spare cash, $700 million was the latest annual figure (this compares to Hobart’s $20 million) was similarly diverted to financiers and managers. Were it not privatised in 2002, by now it would have tipped $1 billion into Commonwealth coffers. Michael West in The Age has posted two excellent articles on how the Macquarie privatisation model has worked to shift money to the rent seekers.

The benefits of privatisation were ostensibly to reduce public debt. Instead we have even larger amount of private debt and returns to governments diverted to rent seekers. The practice also highlights the distortion resulting from the preferential taxation treatment given to debt financing vs equity financing. It is difficult to see why, in the case of acquisition of existing assets, this is desirable public policy.

Michael West’s articles can be found HERE and HERE.



No comments:

Post a Comment