Ergon Energy is a monopoly supplier outside of the SE corner because it is subsidised with a ‘community service obligation’ to the tune of $548M (for 2019/20) so that regional Qlders pay about the same price for electricity as consumers in the much more densely populated, and therefore cheaper to supply, SE corner. It’s in the annual report.
Be careful what you wish for… to get retail competition into regional Qld, consumers would need to pay the true cost of their sparsely populated network.
Not wanting to take away from your arguement, just a minor quibble: Air Traffic Control & Fire Fighting are the Federal Government’s responsibility, not the responsibility of the airport owner. The associated infrastructure is also a Federal responsibility. Also, not all commercial airports/aerodromes have air traffic control. Many are controlled from a distance by larger ATC towers in larger cities.
Any reason for saying this? Do you claim they are a monopoly or act like a monopoly? I am not asking for bad behaviour here but specifically monopolistic behaviour.
FWIW Houston TX has two commercial airports surrounded by 5 private airports in fairly close proximity about 10-15 miles from the main runways, and many more beyond 20 miles. ATC is an FAA responsibility. The radar, facilities and staff are not free and ‘it’ is not ordered out of a book; flight paths need to be negotiated in the air and on the ground, not to be confused with a flight plan. The more airports in a vicinity the more complex and costly it gets. As for non-tower airports, the towers at IAH and HOU as well as Houston Approach and Departure has to manage all IFR traffic and keep it separated from the VFR traffic for starters, and take handoffs from the secondary tower at DWH. I hope the point is made a bit better; consider adding another major or private airport into such a mix. But I stray from monopolies per se into the realm of airports being a natural example where it may be better. Look at MEL and AVV for example and compare in a competitive sense.
Airservices is one of our government companies with their hands out. I submit there is a relevant connection to monopolistic airports vs overall costs and the sanities of same.
As I said, I wasn’t trying to detract from your arguement, as I agree with what you are saying.
// Cynical comment warning…
It could be generalised to say that the current Government generally has their hand out to all except the largest corporations, and big donors to the party.
// …end warning.
That’s odd, some people say they have their hand out to those all the time.
In an ideal world, monopolies make a lot of sense. Unfortunately reality is a long way from ideal. Telecommunications is a good example - frequently there are 3 mobile phone towers where one was adequate, except each company wants to control its own infrastructure. The reason is the PMG was so bureaucratically constipated it was unable to keep pace with change. And so it is with any government run organisation - they do not have the freedom to innovate and make mistakes because the people quickly decry any ‘waste of public money’ not realising mistakes are part of the learning process that allows organisations to move forward. No doubt Telstra Optus and Vodaphone make lots of blunders but they are tolerated because the public ‘are not paying for it’ - although they are of course, it comes in every phone bill.
When the monopoly is not government owned, the owners want return on investment. The ‘common good’ is imposed externally by government to counter ‘unreasonable’ profit making. When the 4 major banks declare a profit of nearly $1000 for every person in Australia per year, it has to be asked is that reasonable? Some may argue the banks are in competition, but with such huge profits where’s the incentive? It is a sort of conglomerate monopoly.
So no, monopolies are unfortunately useful in some circumstances but not what I’d call good for the people. If governments had the ability to run monopolies as they should be run, they would be great. Sadly, that might happen under a totalitarian regime but I don’t see it happening in Australia.
There are many examples of natural monopolies for the provision of services for the good of the people. Essential services like roads, water and sewage, police, electricity, gas, rail, etc.
Doesn’t mean that those things need be run by the Government, just closely monitored to ensure monopolistic behaviour does not happen.
In quoting the huge dollar profits of the big 4 make you are ignoring the huge amount of capital that they have. How can you ask the question is it reasonable with no comparison of percentage profit margin? They do in fact have high returns on investment but saying it is due to monopolistic behaviour is over simple.
The big 4 have quite a few advantages that make them very profitable. We have just had a royal commission that found they had were reaming customers in a number of creative ways. They are large and benefit from efficiencies of scale and ability to borrow at better rates internationally. They also have well known names and benefit from the lazy tax where people leave money with them at disadvantageous conditions because it is ‘safe’. They have much of their capital in the housing loan market that has been very profitable for the last few decades as the market boomed. The big 4 are highly leveraged on the international scale which accounts for much of their profit margin.
According to the Australian Banking Association there are 86 banks and 136 Authorised Deposit-taking Institutions in Oz. If too many people do not shop around for cheaper banking services it isn’t due to lack of alternatives.
I know it is popular to bag the big banks and they have many faults and on an international scale the sector is fairly concentrated but I don’t see the evidence that they are a monopoly.
The toll road infrastructure is very close to a monopoly in Australia now, which in itself may not be a problem, but the agreements are such that tolls rise by 3 or 4 percent or CPI each year which ever is the highest. It should be based on CPI only. In times of low or no CPI increases the cost of using goes up in real terms and this is propagated for the life of the toll road.
It may be more useful if we had all the toll road projects together in one financial assessment to consider whether this is reliable. Each one will have different returns or circumstances. One source of industry information, but not for free?
CPI is a complex number with many factors. The cost of building a major road project does not follow CPI. There is a subset of the CPI included in the project costs, and complexity in how some projects have been financed.
Toll operators seek a commercial return on their investment. This may be the original construction cost, or a discounted purchase price paid to the previous is owner/builder. Most are on long term leases/concessions? Whether it has been a good deal for consumers, as you note one business Transurban holds the rights to approx 3/4 of the toll roads nationally!
If you are interested, perhaps there is some follow up from the ACCC and government. It’s some time past.
Note:
Post edit - the following ABC opinion piece asks even more questions as to the benefits or not of the investment in Sydney’s toll network.
Business costs can’t truly track CPI and in the case of toll roads business costs such as labour, contractor, services and materials don’t track CPI. Changes in these costs would affect operating costs for a toll road operator. Some of these costs are also not in standard macroeconomic CPI calculations.
Notwithstanding this, usually there are alternatives to the toll road, which may be longer or take more time. One has to evaluate whether the toll cost is preferential to increased distance and/or time.
With recognition local costs are not 1:1 the toll costs in US metro areas are a fraction of our own
It might be justified or another ‘nothing to see, next’ type matter.
Except when routes are closed to fulfil contract terms to force people to use the toll road.
The aim of any commercial enterprise is market dominance - effective monopoly. At what point is that achieved?
Speaking of monitoring our competitors… I was shocked to see that many items of fruit and veg at Coles and Woolworths in Sydney were selling for IDENTICAL prices. In the US such collusion is not only frowned upon but is vigorously stamped out. In Oz it seems to be tolerated.
It may not be collusion but competition. Australian shoppers often buy based on price and if they know that say Coles in cheaper than Woollies, they might decide to shop their. Coles and Woolworths (and other supermarkets) making their competitors prices is a disincentive to change the supermarket one shops that.
If say Woolworths dropped their banana price to 5% less than Coles, Coles is likely to respond by matching the price or potentially trying to better it. This is how competition works.
At Rusty’s Markets in Cairns, all of the 100 or so stall holders generally have identical prices for fruit and vegetables.
Much like the thieves in the local fuel cartel having identical prices.
I beg to differ. Competition works when an industry player is prohibited from controlling in excess of a certain share of the market. As a school kid I learned that only in the former Soviet Union was the supermarket sector more concentrated than in Aus.
No wonder it was so hard for ALDI to get a foot hold here. Not to mention KAUFLAND tossed in the towel last year when it saw how closed the sector is to competitive forces.
I suppose you can’t blame them for playing within the rules. You must blame the rule makers for clearly sleeping at the wheel.
