Although privatisation of state-owned enterprises made great progress in New Zealand and elsewhere throughout the world during the 1980s, Australia has so far opted mainly for ‘corporatisation’, which aims to replicate in the public sector some of the constraints and incentives that operate in the private sector.
In this Occasional Paper, Dr Roderick Deane, a close observer of New Zealand’s extensive privatisation program, argues that although corporatisation can dramatically improve the performance of state-owned enterprises, it cannot be a complete substitute for privatisation because it cannot replicate three crucial aspects of private ownership:
- ownership cannot be transferred through the share market;
- competitive neutrality cannot be achieved while government debt carries an implicit guarantee; and
- state ownership increases the scope for efficiency-reducing intervention.
Privatisation is the next logical step: ‘it is only by this means that it will be possible to realise the ultimate efficiency gains and to ensure that the benefits achieved to date by corporatisation are not reversed’
