Our society needs infrastructure so that we can go about our daily business. Electricity, water, transport (public, road and air), schools and hospitals are the principal examples of the areas where infrastructure is required to deliver services to the people.
Let's pick an oldy but a goody, Citilink, to examine some of the issues.
We, the people, needed a better(?) road system. Government decided not to provide us with the roads with our money, but chose the public-private partnership route. There was dodgy financing involved with stapled securities, special arrangements to "encourage" users to use the system and public guarantee of debt and income. The public sector, us, kept the risks and transferred the profits to the private sector.
The new road was tacked on to existing roads that we had paid for - we did not receive compensation for this.
The new water desalination is another example where the private sector is guaranteed income and we have to pay extra for the privilege.
It is government's responsibility to provide us with the fundamentals like water, however, they are frightened to do so because they would have to borrow to do this. And the opposition party of the day will bleat about inflicting debt on our children. So government says private sector is carrying the debt, but this is, in fact, extreme carelessness with truth. Government is guaranteeing the debt and paying the private company money so the private company can pay its interest bill and make a profit.
So, in reality, it is the government's debt, but without the debt appearing on the government balance sheet.
Debt is not necessarily bad, we all borrow to buy our homes, we even borrow to do renovations or extensions, and as long as we pay off that debt, we considered by banks and our friends and families as be eminently sensible.
But if government borrows to renew or increase infrastructure (effectively our home) then it is called irresponsible. It is not - the government is doing its job providing the essentials.
The misrepresentation that borrowing for infrastructure burdens our children with debt ignores the fact that the infrastructure has a lifespan. For the early part of its life, we are paying for it, then as our children get into the work force and use the item, then it is their turn to pay.
Conversely, with water, they are using the infrastructure without the means to pay for it when they are young, so at some stage they should pay for the water they consume.
The overall cost of the project via the private route has to be more costly to community in the long run because private sector has higher costs of borrowing and also has to ensure significant returns to their shareholders.
Public-private partnerships are flawed and a fraud on the community.
Let's pick an oldy but a goody, Citilink, to examine some of the issues.
We, the people, needed a better(?) road system. Government decided not to provide us with the roads with our money, but chose the public-private partnership route. There was dodgy financing involved with stapled securities, special arrangements to "encourage" users to use the system and public guarantee of debt and income. The public sector, us, kept the risks and transferred the profits to the private sector.
The new road was tacked on to existing roads that we had paid for - we did not receive compensation for this.
The new water desalination is another example where the private sector is guaranteed income and we have to pay extra for the privilege.
It is government's responsibility to provide us with the fundamentals like water, however, they are frightened to do so because they would have to borrow to do this. And the opposition party of the day will bleat about inflicting debt on our children. So government says private sector is carrying the debt, but this is, in fact, extreme carelessness with truth. Government is guaranteeing the debt and paying the private company money so the private company can pay its interest bill and make a profit.
So, in reality, it is the government's debt, but without the debt appearing on the government balance sheet.
Debt is not necessarily bad, we all borrow to buy our homes, we even borrow to do renovations or extensions, and as long as we pay off that debt, we considered by banks and our friends and families as be eminently sensible.
But if government borrows to renew or increase infrastructure (effectively our home) then it is called irresponsible. It is not - the government is doing its job providing the essentials.
The misrepresentation that borrowing for infrastructure burdens our children with debt ignores the fact that the infrastructure has a lifespan. For the early part of its life, we are paying for it, then as our children get into the work force and use the item, then it is their turn to pay.
Conversely, with water, they are using the infrastructure without the means to pay for it when they are young, so at some stage they should pay for the water they consume.
The overall cost of the project via the private route has to be more costly to community in the long run because private sector has higher costs of borrowing and also has to ensure significant returns to their shareholders.
Public-private partnerships are flawed and a fraud on the community.
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