In the ongoing battle against inflation, we often overlook the elephant in the room: privatisation. Australia's persistent inflation problem, a pain point for its citizens, is deeply intertwined with the country's embrace of privatisation, a policy that has been both celebrated and vilified since the 1980s. Despite the passionate debates, the average person remains largely unaware of privatisation's role in driving inflation, with the blame often falling on the shoulders of the Reserve Bank of Australia's governor or workers demanding fair pay. But what if the real culprit is the very act of privatisation itself?
The numbers don't lie. The fastest-rising costs in the Consumer Price Index (CPI) basket over the past two decades have been utilities (gas at 5.9% per year), electricity (5.7%), medical and hospital services (5.5%), insurance (5.3%), schools and childcare (secondary at 5.2%, preschool and primary at 3.9%), water and sewerage (4.6%), and housing (3.9%). These are all areas where public goods and services were once readily available at affordable rates, or where privatisation has led to the emergence of parallel, for-profit systems alongside struggling universal public options.
The privatisation of essential services has created a vicious cycle. When global energy price shocks occur, for-profit providers scramble to protect their profit margins by raising fees, often with little transparent competition. This dynamic is further exacerbated by the fact that Australia has outsourced the provision of critical services to these actors. The result? A perfect storm of rising prices and diminishing public control.
The scope of privatisation in Australia is vast. From the 1990s sell-offs of iconic companies like Qantas and Telstra to the explosion of government-funded human services contracted to for-profit providers since the 2010s, the impact is far-reaching. Tens of thousands of businesses, from GPs to private hospitals, are now profit-driven, contributing to economy-wide price increases. While government balance sheets may have looked better in the short run, the long-term costs are now becoming apparent.
Workers bear the brunt of this. Expensive public contracts, higher fees, increased interest rates due to inflation, and unemployment as the Reserve Bank's hikes contract the economy are just some of the consequences. For instance, over $20 billion in public money goes to private schools annually, with no control over their inflationary fee schedules. It's a system that works against the interests of the very people it serves.
The government's response? Price controls, of course. Australia has a history of legally capping essential prices to control inflation and protect citizens from profiteering, as seen in the post-war period, the 1970s oil crisis, and the 1980s Prices and Incomes Accord. A windfall profits tax, heavily taxing sudden unearned profit spikes, could reduce inflation by removing the incentive for big oil, supermarkets, and banks to raise prices excessively. Wealth taxes can also curb inflation by preventing excess cash from chasing limited resources like housing.
However, the only long-term structural solution is public provision. We must repair the 'leaks' created through underfunding and limit the expansion of our universal public education and Medicare systems. Childcare should be integrated into the public education 'stack', and markets for fee-charging schools, GPs, dentists, and specialists should be dissolved with expanded public coverage. This means weaning privatised parallel systems off the public teat.
Public ownership and control should be prioritised in energy, where exposure to global supply shocks is most painful. Establishing a new Commonwealth entity to build, own, and deliver cheap renewable energy would be a game-changer. All of this, I predict, would be hugely popular, despite the wailing and gnashing of teeth from the business sector and its mouthpieces.
The RBA's 'sticky' domestic inflation is the macroeconomic legacy of a failed neoliberal project of outsourcing, privatisation, and weakened regulation of self-interested actors. With geopolitical inflation risks on the horizon, the government must step up and reclaim the field. It's time to confront the root cause of inflation and restore public control over essential services. After all, the average person deserves better than to be left in the dark about the true culprits behind their rising costs.
