Development on Privatization in Australia

Development on privatization in Australia

Privatization entails a full or partial move of ownership of public enterprises to the private sector. Different economies usually promote privatization within their nation as part of the development process. As per now, most countries globally promote privatization of assets as a key role in promoting the private sector. Australia is one of the many nations, which embraces privatization.

Development on privatization in Australia

Privatization came into practice when Australia first sold the commonwealth bank in 1991. The move towards selling the entity was because of the introduced capital adequacy guidelines that ruled the banking institutions. The rule suggested an increase in a bank’s equity base, in case of an expansion. This had a significant effect to the commonwealth budget and thus the weight passed to the government. Other privatization actions followed suite with the Public Trading Enterprises. The criterion for privatization was first, to pass though a stage of corporatization, where the public corporations operated under public ownership. These entities would then have to meet certain commercial benchmarks as required by law. With ease in the privatization process, most of the Public Trading Enterprises fell into the hands of private investors (Reserve Bank of Australia Bulletin, 1997).

Australia is among the many nations, which believes in privatization as a significant move to economic growth. The most affected sectors are the transportation sector, communication sector, the power generation sector and some financial sectors owned by the public. In the side of the commonwealth, the transfer of transport and communication sectors to the private sector were highly significant. The nation originally privatized their financial institutions and insurances offices followed by the sale of electricity and gas enterprises.

The experience seen in the Australian move to privatization follows the pattern noted in the OECD countries. In such countries, the business entities, which operated under a competitive sector within the economy such as financial institutions, were initially sold. On the contrary, the entities, which required restructure in order to make them competitive in the market, came later in the process of privatization.

Major projects of privatization have influenced the country intensely. With the government as the major player of the activity, the economic growth remains to be a puzzle to the local people and the economic analysts.

Focusing on privations may have both negative and positive influence to a nation's economy. This happens, especially, when the state transfers the ownership of sensitive sectors to the private investors. Just as the Australian government does, privatization of the flourishing sectors within the economy will lead to a negative impact to the level