Sunday, 25 August 2013

Airport gravy train

As we saw with the Hobart Airport HERE, the Macquarie syndicate which included RBF with a 49.5% interest paid too much, which meant after locking in interest rates there was insufficient cash to fund capital upgrades.

Hence Abbott’s offer of a bailout.

Sydney Airport’s spare cash, $700 million was the latest annual figure (this compares to Hobart’s $20 million) was similarly diverted to financiers and managers. Were it not privatised in 2002, by now it would have tipped $1 billion into Commonwealth coffers. Michael West in The Age has posted two excellent articles on how the Macquarie privatisation model has worked to shift money to the rent seekers.

The benefits of privatisation were ostensibly to reduce public debt. Instead we have even larger amount of private debt and returns to governments diverted to rent seekers. The practice also highlights the distortion resulting from the preferential taxation treatment given to debt financing vs equity financing. It is difficult to see why, in the case of acquisition of existing assets, this is desirable public policy.

Michael West’s articles can be found HERE and HERE.



Saturday, 24 August 2013

Gay's fall from grace
Tasmanian timber baron John Gay was this morning fined $50,000 for insider trading in a Launceston court. It's been a serious fall from grace for a businessman who was once highly influential and seemed poised to build a controversial pulp mill in northern Tasmania.

Gay is the former chairman and managing director of failed Tasmanian timber company Gunns Limited. His cavalier disregard for conventions and processes culminated with the insider trading charge; he changed his plea to guilty at the 11th hour and admitted he sold 3.4 million Gunns shares based on inside information which he ought to have known would affect the share price. Gunns, once a top 100 ASX company, is the highest profile insider trader snared by the Australian Securities and Investments Corporation. And it’s not as if Gay was a back-office clerk.

Sunday, 18 August 2013

Abbott's infrastructure vision

The election ritual certainly reinforces a belief in cargo cultism. On his latest flying visit to Hobart Tony Abbott promised $38 million to help upgrade the Hobart Airport, sold as a much needed upgrade of a public facility, but in reality a bail out of a badly managed private consortium.