![Sample our Politics & International Relations journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5947/TOC-Subject-Sample-2021-Politics-International-Relations.jpg"})
ABSTRACT
On 26 November 2022 the Andrews Labor Government was re-elected for a third term in the State of Victoria. The starting point for this paper is its decision during the pandemic to seemingly break with neoliberal political orthodoxy, by boldly and deliberately leveraging the state’s balance sheet to avoid recession, using debt-funded record levels of spending, particularly on infrastructure, as a means of doing so. The paper argues that in decisively embracing a neo-Keynesian budget strategy, the Andrews government did not actually break with the recent neoliberal past. It turbo charged it, with the dramatical increase in debt-funded spending being used to finance a massive expansion of an intricate network of private monopoly contractors operating everything from ports, tollways and public transport, to policy advice, jails and road maintenance. The paper concludes that over the last four decades of policy reform, Victoria has been transformed into a ‘Rentier State’.
2022年11月26日维多利亚州的安德鲁斯工党政府第三次当选。本文的出发点在于该届政府于疫情期间似乎要与新自由主义的政治教条决裂，大胆而稳当地利用州资产负债表以避免衰退，办法就是通过举债增加投资尤其是基础设施的投资。本文指出，安德鲁斯政府虽断然采用新凯恩斯主义的预算，但并非真地与新自由主义的过去告别，而是为其输血打气。巨量的举债投资为私人垄断承包商融了资，他们的业务从港口到收费站到公共交通到政策咨询到监狱到道路养护。本文的结论是，经过以往四十年的政策改革，维多利亚州已被改成了一座“收租院”。
Acknowledgements
I would like to thank Terry Burke, Jago Dodson, Benno Engels, Paul Strangio, Jim Murphy and 2 anonymous reviewers for very helpful suggestions on earlier drafts.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Victoria accounted for 31% of the deterioration in all State and Territory budgets between 2019/20 and 2020/21 (https://www.abs.gov.au/statistics/economy/government/government-finance-statistics-annual/latest-release accessed on 2 February 2023).
2 Former Minister in the Cain/Kirner governments, Theo Theophanous has argued that while the Andrews government has, like Cain, used debt-funding to drive economic recovery, it is nevertheless different because it has proven itself to be a competent financial manager. He rejects comparisons between the two on that basis (Theophanous Citation2020). The argument developed in this paper is concerned with the way both Governments have used state finances for counter-cyclical economic ends.
3 I mean by this that the activities that the role of the state shifted from direct provision and detailed regulation to a different and more complex form of governance involving contracts, new regulations and regulators which have become progressively more active. The state’s reach as measured by spending and regulatory oversight actually expanded. Similarly, proceeds from the sale of the state’s utilities were used to retire state debt, which in turn was replaced by private debt.
4 This term is used generically to refer to private companies which operate in concentrated industries and which enjoy substantial market power over their customers.
5 The reforms, dubbed The Kennett Revolution (Costar and Economou Citation1999), were remarkably similar to those rolled out in many other countries across the globe, involving a ‘shock and awe’ strategy explained in some detail by Naomi Klein (Citation2008).
6 Ilanbey (Citation2022, 35) describes the Bracks Labor Government’s budget strategy this way, ‘The Bracks Government was a low-taxing, low-spending government, Kennett-style, and thus neutering the Liberal opposition on budget management’.
7 Vince Fitzgerald and Marc Robinson were two prominent economists who argued during the 1990s and early 2000s that the state governments should not play a fiscal stabilisation role. Their submissions to the NSW Public Accounts Committee capture their views very well. Robinson was particularly pointed: ‘In my view it is quite right that State Governments should not be trying to run active counter cyclical policies’ (Robinson, quoted in NSW PAC, Citation1994, 62; see also Robinson Citation1994).
8 While a similar pattern is evident for all Australian states and territories during this time period, the growth in net debt (and spending) in Victoria far exceeded that of any other jurisdiction (see for example https://adepteconomics.com.au/wp-content/uploads/2022/07/State-budget-update-30-June-22.pdf accessed on 2 February 2023).
9 It expressed a similar view about the need for reforms to Victorian business enterprises:
‘By exposing these businesses to greater market competition, the Government aims to reduce costs and improve services to both industry and households in key energy, water, port and transportation services’ (Victorian Government Citation1993, 1).
10 The Independent Review of the Victorian Retail Energy Market tried to estimate retail market margins, having not been allowed to acquire that information from the companies. It made the following observation:
‘Confidential conversations with retailers indicated the Victorian market is viewed as having higher margins than other jurisdictions … ’ (24).
11 Leigh and Triggs (Citation2021) concluded that concentration from already high levels increased significantly for 43 industries under examination, with electricity and gas figuring prominently. ‘Common ownership increases estimated concentration by over 50 per cent for eight industries: concrete product manufacturing, copper ore mining, department stores, electricity retailing, explosives manufacturing, fuel retailing, gas supply and motor vehicle dealers’ (emphasis added). In the case of fossil fuel electricity generation the increase was 41%.
12 The Auditor-General (Citation2012) found that between 2005/6 and 2011/12, ‘the subsidy to operators grew by 65 per cent from $0.95 to $1.56 billion’ (compared to services growth of 35% and patronage growth of 34%) (1).
13 Bus privatisation was similarly problematic. 70% of the State’s buses were in private hands and had been that way for decades, when Kennett decided to sell the Government’s 30% share in the form of two contracts, through a sale process beginning in 1993. The Auditor-General has pointed out (2009, 2012, 2013, 2014 and 2015 and 2021) that the 27 private contracts with 11 operators covering 70% of the fleet had up until 2015 not included effective performance standards, did not require operators to provide Government with access to their financial reports, and were not open to the Government to end them or put them out to competitive tender. It was not until 2018 that the State Government began to move these contracts across to a performance-based regime, sparking a wave of takeovers. The remaining 30% of buses were covered by an unenforceable performance contract, which was initially won by French company Transdev in 2013. It was re-tendered under a tighter performance-based regime and awarded to Melbourne-based company Kinetic (which also runs SkyBus) in 2021.
14 A few examples illustrate the extent of this. In 1996, the Australian-owned Transfield and a Japanese construction firm Obayashi, trading as Transurban, won the concession to build and operate CityLink. In 2002 its construction arm was sold to the Australian-owned Leighton Holdings. In 2000, Leighton purchased John Holland, another large Tier 1 construction firm. In 2015, Leighton Holdings was acquired by CIMIC, which also acquired Theiss Construction (it had been acquired by Leighton in 1983). CIMIC sold John Holland to Chinese Communications and Construction Corporation shortly afterward. In March 2022, CIMIC was taken over by the Spanish construction giant, Grupo ACS. In the space of a decade, the Tier 1 construction industry was effectively consolidated and sold into overseas ownership.
15 The massive $18b level crossing removal programme which will see 87 crossings removed from across the metropolitan area now involves only 4 ‘alliances’, each composed of 2–5 firms. As with the PPPs, the major participants in each consortia are all overseas owned.
16 In 2020/21, it has been estimated that payments to the Big Five consultancy firms (the four identified in Table 2 plus Accenture) totalled $2b (Australian Financial Review, Digital Edition, 9 August 2022).
17 This does not mean that they will always make surplus profits but that by virtue of their market power they are in a strong position to do so, or alternatively to reduce output (or some combination).
Additional information
Notes on contributors
David Hayward
David Hayward is Emeritus Professor of Public Policy and the Social Economy at RMIT University.