Ideas@TheCentre
Taken for a ferry ride
Sydney needs a network of ferries that is able to cater to the city’s changing demographics but is also financially sustainable and responsible.
The current state-controlled model is inefficient, backward looking, and costly to taxpayers.
Sydney Ferries made more passenger trips in 2000–01 than in 2010–11, and has reported persistent deficits for the past six years despite heavy government subsidies.
The NSW Coalition government’s franchise reform attempts to address some of the problems outlined in the 2007 Walker Special Commission of Inquiry. However, ‘franchising’ Sydney Ferries will not address deeper structural problems.
Monopoly and regulation are the root causes of the ferries’ woes and have led to labour, managerial and financial problems. These problems will persist because a franchise monopoly is a halfway solution – an attempt to involve the private sector but not allowing the forces of competition to operate.
Government control of fares and route structure will continue to increase costs and stifle innovation. Subsidies will continue to reward inefficient business practices and produce a corporate entitlement culture. And the government will still own the vessels which a private company will simply operate.
Sydney commuters and taxpayers would benefit significantly from a free and competitive ferry market. An environment free of government regulation and support would encourage entrepreneurs to respond to passengers' needs, increase services, cut costs, and most importantly, run their business at their own cost.
If the NSW government really wants to deliver better value to taxpayers and passengers alike, it needs to do away with monopoly and remove barriers to entry.
Alexander Philipatos is a Policy Analyst with the Economics Program at The Centre for Independent Studies. His report, Free-Trade Ferries: A Case for Competition, was published this week.
