John Kaye speech against the Ports Assets (Authorised Transactions) Bill 2012

John Kaye speech against the Ports Assets (Authorised Transactions) Bill 2012

Friday 23 November 2012

Dr JOHN KAYE [4.23 p.m.]: Here we go again, another dodgy sell-off, another squandering of public assets, another handing over of crucial economic infrastructure to the private sector in order to secure a quick grab for cash by the O'Farrell Government at the expense of the future of the community, at the expense of the future of the economy and at the expense of the future of the environment. The Greens oppose the Ports Assets (Authorised Transactions) Bill 2012 and will vote against it. If through some misfortune it gets through the second reading we will seek to amend it in Committee. This legislation more or less mirrors all the other pieces of privatisation legislation that we have seen come through this Chamber under this Government and its predecessors. Each and every one of them is nothing but a short-term grab for cash, nothing but a ratings agency driven approach to economics that leaves any independent, intelligent observer asking: Why would you sell-off an income-earning asset which has an income stream that can inevitably support the State's finances?



There are at least six key reasons why The Greens oppose this legislation. The first is that it is simply dodgy economics, driven by the thoroughly and comprehensively discredited rating agencies and the fetish of the triple-A rating. This is handing over a long-term income stream for a short-term hit of cash. 

Secondly, this is privatisation of the profit-making aspects of the ownership of the two ports while maintaining the expenses, risks and liabilities in public hands. Thirdly, it is a loss of control of our lifeline, the lifeline of the community of New South Wales to the global economy. Whether we like it or not, governments have made us part of the global economy. Our umbilical cord, our clear connection to that global economy, is through the ports at Port Kembla and Botany, yet they are to be handed over to private sector decision-makers whose only interest is their corporation's bottom line and who have no commitment to the long-term economic, environmental or social health of our community.



Fourthly, there will be massive impacts on the environment, on traffic flows, on local communities and on heritage. 

Fifthly, the process by which this legislation will secure passage through the Chamber is not only damaging to the reputation of New South Wales; it is damaging to the very essence of government. 

Sixthly, there is huge public opposition: the public does not want the ports privatised. This was never mentioned during the election campaign. The Government has no mandate for this but is pushing ahead with it. Despite opposition from the union movement, opposition from the community, opposition from business and opposition from every sector of our society saying this is bad, the Government pushes ahead, with the community having no opportunity whatsoever to have a say.



I will deal one at a time with each of those issues. It has been argued that we need to sell off an income-earning asset in order to invest in infrastructure—the new El Dorado of public policy, that you have to get money into infrastructure and in order to do it you eat yourself. You sell off your old infrastructure to purchase new infrastructure. The problem is quite straightforward. It has been illuminated by a number of economists who have said very clearly that the numbers do not stack up: the arithmetic does not work. For example, Port Kembla shows a profit—not a dividend—of about $50 million a year. We are told it is to be sold at a price of about $500 million a year. That is the same ratio we saw for the electricity industry that Labor tried to privatise. It is the same ratio we are seeing for electricity assets that the Coalition is trying to privatise. It is the same ratio with ports.

The problem is that the real rate of interest, the above inflation rate of interest for governments, is about 2 per cent. At a 2 per cent real rate of interest and an income stream of $50 million a year we can borrow $2.5 billion of capital. That is to say, public ownership of Port Kembla alone—that does not include Port Botany yet—would enable us to borrow $2.5 billion and service it from the profit that comes out of Port Kembla. That is five times the current sale potential. 

The difference is quite straightforward. Because of our collective economic might, because we are a sub-jurisdiction of the Commonwealth, because we are a part of a trillion-dollar undertaking, our capacity as a State to borrow collectively is far greater than the capacity of an individual corporation.

Our rating, our credibility as a borrower, is far higher, so the risk premium is lower so the interest rate we get is lower. Therefore, we can afford to borrow more against that income stream than any private sector investor. It is worth more in public hands than it is in private hands. The problem I have outlined at Port Kembla is probably three times larger at Port Botany. This is not just a $2 billion squander; it is probably more like a $6 billion or $8 billion squander of long-term public wealth and public assets. It is a giveaway of an income-bearing asset for a quick grab of cash. But this is not just about ports; this is about all privatisations. The most successful privatisation was Jeff Kennett's electricity assets sell-off in Victoria—successful in that it was shameful and cost the people of Victoria greatly in the long run. Whenever one talks about privatisation the right wing always says, "Oh, yes, but what about Victoria? How well did we do in Victoria?"



The gross proceeds were about $20 billion even in the most so-called successful privatisation in this country. At a 6 per cent interest rate, which was about the real bond rate at the time, using that sum of money to repay debt would have required about $1.2 billion a year. The Victorian State Electricity Commission's earnings before interest and tax in its last year of operation were $1.202 billion. The sale of the Victorian electricity industry gained nothing for its economy, and everybody quotes that as the most successful example. Every other example, including Labor's gentrader privatisation, has been a net loser. The 99-year lease of these two ports will be a massive net loser to the tune of $6 billion to $8 billion a year. But this sale is being driven by the rating agencies. We are told, "Oh, goodness gracious, we can't borrow more money or we will lose our beloved triple-A rating"—given to us by rating agencies that have been thoroughly discredited by their ratings-for-sale scandal that brought the world's economy to its knees.



The rating agencies scandal triggered the global financial crisis, brought down 100-year-old American financial institutions and destroyed southern European economies. Those same ratings agencies—the spivs in sharp suits—with those same corrupt individuals are driving economic policy in New South Wales to sell off public assets. There simply is no case to heed the ratings agencies. After the discredited collateralised debt obligations scam we should not listen to rating agencies. They should be driven out of town for the damage they have done to our economy. The cost of losing our triple-A rating, if anybody pays any attention to it, is not great—tens of millions of dollars in a budget around $30 billion to $50 billion. Compared with the long-term benefits of maintaining public ownership, whatever short-term costs are associated with losing the triple-A rating are irrelevant.



Any sensible measure of the credit worthiness of our State would consider owning an income-bearing asset a positive outcome and would regard utilising that asset to the maximum advantage of the community and maintaining it in good health for the future of our community as something that should be rewarded, not punished by a downgrading. We simply should not listen to the rating agencies. We should drive economics in this State as if we really care about the future, not as if all we care about is a couple of spivs in sharp suits who have destroyed the economy around the world. It may be argued—we have not heard it yet—that we need to get these ports into private hands because private sector ownership is more efficient. 

What utter, ideological nonsense. Nobody can argue that Port Kembla or Port Botany is poorly managed—they compete on a world scale as well-managed ports that use their assets efficiently. Privatising these ports will give no efficiency gain. On the contrary, the losses will be in efficiency as the corporations' focus moves away from serving the community to maximising profit. The second reason for opposing this legislation is that it is a classic case of selling off the profit-making activities and keeping the risk, liabilities and costs in public hands. That is written clearly in this legislation. Section 3 defines a ports asset to mean, amongst other things, the assets, rights and liabilities of a port State-owned corporation—a port SOC. So it includes liabilities. Section 4 (1) states:

▪               This Act authorises the transfer of ports assets to the private sector or to any public sector agency ... 

Written in black and white, this legislation enables the Treasurer of New South

Wales, Mr Mike Baird, to force the liabilities on to a public sector agency. The

Government has admitted already in Questions and Answers that Sydney Ports

Corporation and Port Kembla Ports Corporation will retain the most expensive

activities—marine safety, emergency pollution response, harbour master and

marine pilots, vessel traffic control, navigation buoys and markers. But the benefits

and joys of owning the lease over the ports and making income will be privatised.

All this bill does is privatise the profit-making activities. Even the Port Botany

landside infrastructure will be maintained in public hands. That is what the

Government is telling us it will maintain in public hands, but what will be in the

lease that Mike Baird signs? What stinkers will be buried in that lease? Will the

clean-up costs remain in the lease? Will the repair of damage done to the ports'

landside be included? Will landside chemical spills be included? What equivalents to

liquidated damages and market and maintenance risks that the previous

Government kept in public hands with its gentrader transaction will be in this

transaction? 

We have seen it before and undoubtedly we will see it again. At the very least the 

Government should be honest and fully capitalise any risks and liabilities kept in 

public hands. It should also be upfront about capitalisation of those costs.

The third 

reason for opposing this legislation is that it involves a loss of control over key 

economic assets. New South Wales is part of a globalised economy. For better or 

worse, we are an import/export State. The Illawarra in particular lives and dies 

economically on its capacity to generate earnings that go out of the region and 

State. This legislation hands over the aorta of New South Wales to private sector 

operators who simple care only about their profit bottom line. They have no 

concern about the future of the State, and no concern about making sure that 

investments at the ports secure opportunities for investment, job generation and 

the future of our State. 

The Illawarra faces three significant economic challenges at the one time. It must 

address rising youth unemployment, bring down its very high carbon footprint and 

compete with the ports of Sydney and Newcastle for freight.

Port Kembla needs a 

$700 million investment or it will become a complete backwater. At the same time 

this legislation creates the risk that the leases over Port Kembla and Port Botany will 

be held in single hands. That means that the new lease operator will be tempted to 

run Port Botany as an overflow port, not the lifeblood of the Illawarra economy, and 

not the unique monopoly infrastructure that generates jobs, opportunities, and new 

import and export opportunities. Port Botany will be nothing but a backwater. This 

legislation will enable some dark scenarios. The lessees of Port Kembla and Port 

Botany, whether foreign or domestic, could put all containers through Port Botany 

and have no container facilities at Port Kembla.

Port Kembla would be relegated to 

car imports and exports of bulk commodities such as coal and wheat without any 

add-ons for the economy of Port Kembla. 

This is a dark scenario for the future of Port Kembla and the Illawarra and one 

which The Greens will not tolerate. The Greens will do everything possible to stop 

its occurring. The same is true with Port Botany. Handing over this State's key 

infrastructure to private operators makes no economic sense. There are real issues 

with the environment, heritage and traffic associated with privatisation. Lifting the 

cap at Port Botany means that local residents will have inflicted on them massive 

increases in noise, a reduction of amenity and the environmental impact of 

additional traffic. 

That cap is not being lifted because it is in the best interest of the State but 

because it maximises the asset sale price. It sacrifices the welfare of local residents 

to fatten up the asset for sale. Later in the debate my colleague the Hon. Cate 

Faehrmann will talk of that in greater detail.

I turn to the dodgy process by which 

this legislation is securing its passage through the upper House. It is clear the bill 

being debated today, on the last day of sitting for Government business, after it sat 

on the Notice Paper for one month, is because a deal has been made with the 

Christian Democratic Party and the Shooters and Fishers Party. The Christian 

Democratic Party clearly does not care about the future of the Illawarra or the 

future of the State. The Christian Democratic Party is purely interested in its own 

power and maintaining the alliance with the Shooters and Fishers Party. It is a party 

that should not call itself Christian because it does not show Christian concern—





The Hon. Paul Green: Point of order: That is a gross insult and very misleading. 

The Christian Democratic Party loves the South Coast.



Dr JOHN KAYE: To the point of order: There is no point of order. I have insulted a 

party not an individual, just as Mr Gay continually insults The Greens. I am doing 

the same.



The ASSISTANT-PRESIDENT (Reverend the Hon. Fred Nile): Order! The member 

is specifically referring to the two members of the Legislative Council who are 

members of the Christian Democratic Party.



Dr JOHN KAYE: Further to the point of order: I could put the same argument; that 

the Minister for Roads and Ports continually refers to the five members of The 

Greens in the upper House.

The ASSISTANT-PRESIDENT (Reverend the Hon. Fred 

Nile): Order! The member can take points of order on that.

Dr JOHN KAYE: They are 

never held up. I hear the ruling. A deal has clearly been done. The deal involves 

cruel and dangerous duck shooting that will undermine the future of our 

environment. It reflects badly on the Government. The practice of deals being made 

with the right-wing crossbench is a monster created by the previous Government 

and it has been exacerbated by this Government. Finally, this legislation is not in 

the public interest. A petition of 10,000 signatures was lodged today in the 

Legislative Assembly, from a population of 408,000 in the Illawarra. I move the 

following amendment:

1. That the question be amended by omitting all words after "That" and inserting

instead:

▪               a select committee is appointed to inquire into and report on the provisions of 

the Ports Assets (Authorised Transactions) Bill 2012.

▪                

▪               2. That the committee consist of seven members comprising:

▪               (a) three Government members

▪                

▪               (b) two Opposition members, and

▪                

▪               (c) Paul Green and John Kaye.

▪                

▪               3. That the Honourable Paul Green be the Chair of the Committee.

▪                

▪               4. That the Deputy Chair of the committee be elected at the first meeting before proceeding to any other business.

▪                

▪               5. That notwithstanding anything contained in the standing orders, at any meeting of the committee four members will constitute a quorum, provided at least one is a crossbench member.

▪                

▪               6. Unless the committee decides otherwise, a member of the House who is not a member of the committee may take part in a private meeting of the committee but may not vote, move any motion or be counted for the purpose of any quorum or division.

▪                

▪               7. That a committee member who is unable to attend a deliberative meeting in person may participate by electronic communication and may move any motion and be counted for the purpose of any quorum or division, provided that:

▪               (a) the Chair is present in the meeting room

▪                

▪               (b) all members are able to speak and hear each other at all times, and

▪                

▪               (c) a member may not participate by electronic communication in a meeting to consider a draft report.

▪                

▪               8. That the committee report by Tuesday 16 April 2013.


Ports privatisation was never mentioned during the election campaign. Following the petition of 10,000 signatures lodged today in the Legislative Assembly—well over the threshold set by the O'Farrell Government for public interest—and that the Government does not have a mandate and— [Time expired.]

Greens Fired Up Over Ports Deal: 'Ducks in firing line as O’Farrell bows again to Shooters Party'

The O’Farrell government looks likely to expand the unwanted guns and hunting culture in NSW by supporting duck hunting legislation proposed by the fringe right wing Shooters Party, say NSW Greens. "In return, the government appears likely to receive support for its contentious ports privatisation plan."

Greens NSW MP and Firearms spokesperson David Shoebridge said:

“First hunting in National Parks and now open season on ducks – who knows where this unholy alliance between Barry O’Farrell and the Shooters Party will end.

“NSW is set to be doubly damned by this rotten deal – with our ports privatised and our native animals pumped with pellets.

“Duck hunting can be an extremely cruel practice. The ducks are often maimed and die slow agonising deaths.

“The former Labor government opened the door to duck hunting in NSW via the Orwellian-named ‘Game Bird Mitigation Program’.

“This latest deal will see more ducks in the firing line and permits issued by the pro-gun Game council rather than the National Parks Service.

“Farmers and land holders are already able to use licensed hunters to shoot native ducks on their own land. There is no need to extend this cruel program any further.

“These pro-gun extremists have proved time and again that they will try and shut down any government who will not bend to their demands.

“In answer to a question from the Greens in the NSW Upper House today , the government would not rule out any further deals with the Shooters Party.

“Labor and the Coalition in government both have a ‘whatever it takes’ attitude to the Shooters Party in NSW, which is seeing an emerging U.S. style culture of guns and hunting,” Mr Shoebridge said.

See Greens website for more details. 

Call for Upper House Inquiry into Ports Legislation - and Transparent Tender Process

The case 'for' privatisation remains dubious, with calls for an Upper House Inquiry and transparency in the tender process. Dr Robert Carr writes.

At the Wollongong Town Hall forum two weeks ago (see short video here), the New South Wales Government had - and lost - an opportunity to sell the merits of its privatisation plans to the public. Many were stunned at how lack lustre the case for privatisation really is – no financial projections or feasibility studies had been prepared by the Government’s speakers, nor any clear view of its economic position to support the plan.

With 10,000 anti-privatisation petition signatures under its belt, today the Save Our Ports Coordinating Committee wrote to NSW parliamentarians, calling for Members to consider an Upper House Inquiry into the Ports Assets Bill before it passes into legislation.

The Committee also raised questions about the transparency of the Expressions of Interest (EOI) process for potential tenderers of the lease of Port Kembla. Concern about the tender process emerged after a member of the local community was refused a request to receive the EOI information ‘pack’.

The Treasurer Mike Baird's response, received 13^th November 2012, read more like an exhibit from the current ICAC ‘Rum Corps’ investigation than a credible and impartial process. Baird says:

"I understand that Morgan Stanley, Government's financial advisor to the transactions, has already advised [the inquirer] that the EOI is intended to be distributed only to those parties that are genuinely seeking to participate in the transaction process. This response still remains current and, on this basis, the document is not a public document."

Mr Baird's choice of phrase - "genuinely seeking" – ought to raise a few eyebrows; the Treasurer’s response suggests that the Government is culling applicants before they receive an application on the basis of who they are rather than the merits of what they submit.

Parliamentarians should not only reject the Ports Access Bill outright, they should seek an Amendment to the Bill that an Inquiry take place into the Bill’s legal, moral and economic implications.

Such echoes calls made previously by the local community and Wollongong City Council. At the Save Our Ports rally at Port Kembla Harbour in August 2012, around 400 residents passed nine resolutions. Resolution 9 was a call for a parliamentary inquiry “before any fixed decision is made”. Wollongong City Council has since passed a motion seeking a Parliamentary Committee before any fixed decision about the Ports is made. There has been no reply by the O’Farrell Government to either request.

So what do we know about the privatisation plans? One argument the Government has put forward is that the state budget is in deficit. The NSW Auditor since found that the O’Farrell government had misplaced $1 billion. The Government’s case that it needs to privatise state assets to put the budget back in the red is simply untrue.

We also know that privatisation will deprive the state of a revenue stream – for spending on public services, health, education and roads - for our long term future. By some estimates, the lease of Port Kembla is set to deprive the state of $50 million annually over the 99 period of the lease (this does not include growth in income due to extensions of the port and projected increases in trade). The Government’s proposed lease price of $500 million is evidently a dud deal, short changing estimated income returns to NSW by $4.5 billion.

Economist Graham Larcombe also made a strong case at the Town Hall forum to show that the NSW Government - which has stated privatisation will increase the efficiency of the ports - is actively perpetuating such a myth contrary to economic research.

Bizarrely, the Port Assets Bill will privatise the profits - but the taxpayers will retain the risks and pay for the costs and liabilities. The public will retain the risks of owning the asset (including environmental), while the leasee will coup only the profits. It makes no business sense to give away the profit-making part of an asset, but retain the risks of owning it.

The Government has proposed it would allow Port Kembla to be double-badged with Port Botany as well. If Port Botany and Port Kembla are leased together to the same (potentially multinational) company, such a move is anti-competitive and should be referred to the Australian Competition and Consumer Commission (ACCC) by the Upper House Inquiry.

Community opposition to the privatisation is widespread and growing. The feeling across our region is that these ports must remain in public hands. That members of the public are denied access to the EOI indicates that the NSW Government, through its agency, has at best fostered an opaque environment around this process, and at worst may have compromised the entire process through its actions.

VIDEO feed - Community Forum on the Proposed Privatisation of the Port of Port Kembla

Community Forum on the Proposed Privatisation of the Port of Port Kembla, Wednesday 7 November 2012, Wollongong Town Hall

At its meeting of 27 August 2012, Council reaffirmed its opposition to the privatisation of the Port of Port Kembla. It was resolved to invite the Premier and Minister for the Illawarra to a public meeting to explain why they support the privatisation of the Port of Port Kembla, and how this can be reconciled with pre-election commitments to not pursue privatisation.

A working group consisting of Councillors and co-opted community members was established to organise the public meeting. The Minister for The Illawarra Hon. Greg Pearce accepted the invitation to attend the Community Forum and nominated Cr Michelle Blicavs to be the second speaker on the panel to explain why they support the privatisation of the Port of Port Kembla.

The community forum was held at Wollongong Town Hall on Wednesday 7 November 2012, organised by Wollongong City Council’s Port Privatisation Group. 

The Forum was facilitated by ABC Illawarra’s Nick McLaren, with speakers:

• The Hon Greg Pearce MLC, Minister for the Illawarra
• Arthur Rorris, Secretary, South Coast Labour Council
• Cr Michelle Blicavs, Ward 2 Liberal Councillor (nominated to the panel by Minister Pearce)
• Graham Larcombe, local resident, Director Strategic Economics Group and instrumental in establishing the Grain Terminal at Port Kembla.

Following the speeches, a public question and answer session was held with panel members:

• The Hon Greg Pearce MLC, Minister for the Illawarra
• Arthur Rorris, Secretary, South Coast Labour Council
• Cr Michelle Blicavs, Ward 2 Councillor (nominated by Minister Pearce)
• Graham Larcombe
• Dom Figliomeni, CEO Port Kembla Port Corporation.

A closing statement was then given by The Hon Greg Pearce MLC, Minister for the Illawarra, prior to him leaving the forum. 

Differing political perspectives on the privatisation of the Port were also presented by:

• Ron Hoenig MP, Member for Heffron, Shadow Minister for Energy, Shadow Minister for Ports
• Dr John Kaye MLC, Greens Member of the Legislative Council
• Noreen Hay MP, Member for Wollongong

Below is a full clip of all speakers who addressed our community at this meeting, and the question and answer session recorded by Wollongong City Council.