The Fiscal Consequences of Privatisation: Australian evidence on privatisation by public share float

Privatisation has become a common government policy in many countries. This paper summarises the salient features of privatisations by public share float in Australia during the period 1989 to 1997. The costs associated with these privatisations are 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 on the public sector net worth may be negative. However, in some cases where the enterprise sold is inefficient the government may realise a gain.