Research Paper No. 665

THE FISCAL CONSEQUENCES OF PRIVATISATION: AUSTRALIAN EVIDENCE

by

Matthew Harris & Jenny Lye

December 1998

Department of Economics. University of Melbourne. Parkville Victoria 3052 Australia

ABSTRACT

Privatisation has become a common government policy in many countries. This paper summarizes the salient features of privatisations by public share float in Australia during the period 1989 to 1997. The costs associated with these privatisations is examined, including both direct costs and the opportunity cost of Australian governments selling assets cheaply. Furthermore, the impact that such sales have on the net worth of the public sector is estimated. The results suggest that there is a cost of underpricing. There is also some evidence that the effect of the public sector net worth may be negative. However, in some cases where the enterprise sold is inefficient the government may realise a gain.
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