Let’s not Relegate Business Participation to the Bin

11 October 2016

LET’S NOT RELEGATE BUSINESS PARTICIPATION TO THE BIN

By Canberra Business Chamber Chair, Glenn Keys


Whichever party is successful at this weekend’s ACT election, the next ACT Government will be expected to focus on making service delivery more efficient.  A drive for increased service delivery, customer focus and efficiency is always important for a Government to do; even more so in light of our current Budget deficit.

Canberra Business Chamber has previously argued that one of the most effective ways to return the ACT Budget to surplus would be to let the private sector use its expertise and innovation to find better ways to deliver services in areas like municipal service delivery, health, infrastructure development and even education.

In this election campaign, green waste collection has become a live topic. What is being considered amounts to government stepping in and providing a service already more than adequately delivered by the private sector.

There has been much debate over the years about whether Canberra homes should have a third bin – a green bin for green waste. A trial is now underway in a small number of suburbs and is set to be extended.

The questions that really need to be asked moving forward are:

  • what is the problem government intervention will solve?
  • is government service delivery really the best answer?
  • what will be the consequences of this plan?

There is no question that when a necessary service is not available at all, or not available to people who desperately need that service, then governments should step in.

What we don’t want is to create a precedent where governments expend limited funds to provide unnecessary services and in doing so impact on the market by creating a biased playing field.

When governments provide services they seem free to consumers, which of course they aren’t as we are paying for them with our tax dollars. It is almost impossible for a private business to compete with an apparently ‘free’ government service, but whose costs are hidden in the Government budget.

Under our current green waste collection system, the ACT has achieved one of the highest rates of resource recovery in Australia. A total of 205,000 tonnes of garden waste is produced in Canberra each year and around 200,000 tonnes of this is now recovered, processed and sold as high-value potting mixes and garden mulch.

By comparison, where green bins are in circulation, people often mix in other household rubbish with the green waste. It is very expensive to then clean these contaminants out and a lower quality product is produced.

There are currently 16 green waste businesses operating in Canberra and between them they employ 50 Canberrans full-time. Based on experience over the border when Queanbeyan introduced green bins, three quarters of these companies will go out of business if the ACT green bin pilot is expanded.

Going back to the concept of green bins providing a free service to ACT residents, it has been estimated this waste collection system will cost our economy $20 million per annum by 2021. The Government’s own ACT Waste Management Strategy 2011-2025 claims 90 per cent of the city’s garden waste is already recycled. Twenty million dollars seems like a high cost for hopefully recovering some of the missing 10 per cent.

This will not be the first time a ‘free’ government service has the potential to impact on the local economy. Private pathology providers have long pointed to the unfair competition created by ACT Government pathology services and the negative impact on the Budget bottom line.

It is estimated that in other jurisdictions, about 10 per cent of pathology services are provided publicly and these are usually associated with a hospital inpatient or outpatient episode. In the ACT, it is believed this number is closer to 25 per cent and the public provider is competing directly with private companies for business.

State governments are responsible for the delivery of hospital services and it makes sense for associated pathology to be part of their bailiwick, however whether they should provide more ‘retail’ type services does raise questions.

While pathology services are funded through Medicare, the rebate does not always match the cost of delivering the service. This drives private providers to work more efficiently and productively.

A recent Ernst and Young report found that in 2014-15, the pathology sector saved the Federal Government $2 billion through productivity improvements. The average annual growth in productivity for pathology providers is 4.3 per cent compared to the Australian industry average of 1.5 per cent.

For the public pathology service, its costs are met by the ACT Government and they are essentially subsidised compared to their private sector counterparts.

Every time a government decides to provide a new service they must weigh up need as well as consequences on jobs, business and the economy. We don’t want to continually be faced with situations where sudden shifts in government service delivery put people out of work and send businesses bankrupt, and end up costing taxpayers more money for delivery of a service that can be effectively delivered by the private sector – especially when there are other services the Government needs to provide. This is compounded where there are high demands on the Government budget for such urgent services.

Lack of certainty about what services the government decides it wants to deliver will discourage people from ever trying to go into business and limit the private sector’s enthusiasm for addressing service gaps. In the long term that will cost government, and all of us through or taxes, a lot more. It will also deny us innovative and efficient solutions that could make vital services more widely and cheaply available.