GP losses, crossover unionists, Oatley's ego and electricity rip-off

5. How much is too much to lose on the GP?

By Stephen Mayne

We won't know the exact figures until shortly before the November 25 Victorian election but with the smallest crowds since 1998, this year's Formula One Grand Prix will almost certainly post another record loss for taxpayers and next year's ban on tobacco advertising will probably cause another record loss in 2007.

The warm glow from the Commonwealth Games that still hovers around Melbourne and the feast of other sport and politics to digest will probably smother any possible debate about the deteriorating economics of the GP.

However, across all the papers this morning there is some talk of falling crowds and Foster's dropping its $5 million naming rights sponsorship deal after next season. The spiralling losses over the past ten years have unfolded as follows:

Year	Operating loss	Parks Victoria subsidy
Pre-1996	$18.86m	$1.31m
1996	$35.01m	$1.76m
1997	$9.04m	$1.76m
1998	$9.02m	$1.76m
1999	$9.18m	$1.76m
2000	$7.66m	$3.02m
2001	$12.44m	$3.02m
2002	$18.75m	$4.01m
2003	$25.86m	$4.01m
2004	$22.64m	$4.01m
2005	$24.59m	$3.95m
Total	$184.03m	$29.06m

Harry Hindsight probably thinks that John Brumby's original idea as opposition leader was right – the Grand Prix would have been much better around Docklands, just as it was for the walking events at the Commonwealth Games.

Sadly, taxpayers are now spending $23 million each year erecting the temporary track in the $526 million Albert Park, which is a hell of a lot of money to spend for a two hour car race through a public park that still infuriates and dislocates the locals.

At least the Commonwealth Games will leave some legacy assets, such as the rebuilt MCG. The Grand Prix legacy is just some juicy contracts for the likes of Halliburton and a couple of months work for a few hundred CFMEU members. If both sides of politics are really committed to keeping the GP in the longer term, then it is time to run the numbers over investing $200 million on a permanent track.

Making a direct loss on an event is fine if you can demonstrate marketing spin-offs or broader economic benefits. The NAB spent $20-25 million marketing itself throughout the Commonwealth Games and most observers reckon it was a stunning success.

The problem with the Grand Prix – and many other major events – is that the economic benefits are grossly exaggerated using dubious assumptions. In the case of the Grand Prix, these have been designed to distract attention from Ron Walker's original broken promise in December 1993 – that the event would cost $5 million to establish and then make a profit each year.

The Bracks Government's own economics adviser, Peter Fitzgerald, was quoted as follows in The Age on Friday responding to claims the Commonwealth Games generated $1.5 billion in economic benefits and 13,000 jobs.

I believe that's an over estimation of benefits by threefold and an over estimation of jobs by many thousands. We must get rid of the spin, the counterfeit dollars, the exaggerated benefits, and the political fictions about losses and costs and savings.

And that's coming from the man who the government employed in 2004 to review public private partnerships. At last, someone prepared to call it as it is.

Unlike most major sporting events in Melbourne such as the Australian Open tennis and the Spring Racing Carnival, the Grand Prix is a financial lemon but we're yet to see how much is too much for the politicians when it comes to the financial loss each year. Surely a budgeted loss of more than $30 million would raise questions about exercising the five year option beyond 2010.

Ron Walker turns 67 this year and the future of the event is still very much based on his relationship with colourful British billionaire Bernie Ecclestone. "I speak to Bernie every second day, he's one of my closest friends," Ron gloated yesterday.

Any why wouldn't Bernie like Ron when he's delivered bi-partisan support for almost $300 million in secret taxpayer funded licence fees to his companies since 1996.


13. Another 15 unionists who crossed the Rubicon

By Stephen Mayne, MEAA member

The rapidly expanding list of unionists who crossed to the dark side has attracted plenty of attention from bruvvas keen to out their turncoat former colleagues.

Even the hard-left MUA has had their sell-outs, such as Brad George who is now with the newly established offshore manning agency Offshore Marine Services.

However, there is still some debate about people who take up management roles with a Labor government or not-for-profits which aren't particularly motivated to screw their workers. For instance, Joe Ceritelli left the Victorian branch of the SDA and is now in HR with the Catholic Education Office. He's probably just a dedicated Catholic rather than someone cashing in from all his union knowledge.

We've also discovered another unionist who finished up as a Liberal MP. Victorian Andrew Brideson once headed both the Teachers Association of Australia and the Victorian Affiliated Teachers Federation but he was part of the 1992 Kennett landslide and will bow out at this year's state election.

Someone even nominated The Australian's foreign editor Greg Sheridan who went from being union official for the SDA in the 1970s to someone who slavishly pushes the Rupert Murdoch Republican line for his paper.

We've also cleared up the union history of Steve Harker, the CEO of Morgan Stanley Australia. He was a researcher for the Federated Ironworkers Association in the late 70s early 80s who was known in Young Labor circles as Hitler Youth Harker because of his right wing views and Aryan appearance.

Someone else nominated Wendy McCarthy, who set up the Women's Electoral Lobby and then in "retirement" accepted a fee-paying seat on the board of Star City Casino.

Even the MEAA has produced the odd turncoat, namely former NSW state secretary Michelle Hryce who is now running HR for Sydney Ferries, although once again, at least it's a Labor Government which is ultimately 50% controlled by the NSW Labor Council.

Once again, check out the full expanded list here and let's try to crack 100 names with all corrections and additions to smayne@crikey.com.au.


25. Are Victorian electricity customers getting ripped off?

By Stephen Mayne

Something strange is going on with electricity prices in Victoria. Distribution tariffs were cut by an average 12.3% on January 1 after the Electricity Distribution Price Review, but for some reason the retailers haven't passed on the savings to consumers.

The story seems to be that Energy Minister and factional warrior Theo Theophanous wanted to set up a hardship policy but could not get funding from his cabinet colleagues. Theophanous is privately scathing of John Niuwenhuisen for not coming up with the "right formula" in his hardship study last year, so he's apparently taken matters into his own hands.

The industry is awash with talk that Theo is now cutting secret deals with retailers to allow them to keep the money saved through efficiencies achieved by electricity distributors. We're talking $10 million a month over the March quarter but it would be hard to imagine $30 million being given back to poor consumers.

The distributors are apparently most unhappy to see their efficiencies being pocketed by retailers and it would be interesting to know what the rest of the Bracks Cabinet thinks about Theo seemingly taking matters into his own hands.

This table lays out the key statistics and it raises some very interesting questions about whether Victorian power consumers are being dudded after the independent regulator tried to pass on significant efficiency gains in the privatised electricity distribution system.

Distributor	% Price Cut	Dist Revenue 05	Annual $ Cut	Monthly Cut	March Quarter Cut
CitiPower	8.7%	$134,226,821	$11,677,733	$973,144	$2,879,441
Powercor	17.3%	$304,580,741	$52,692,468	$4,391,039	$12,992,663
United Energy	14.7%	$228,334,352	$33,565,150	$2,797,096	$8,276,338
SP AusNet	9.3%	$233,349,540	$21,701,507	$1,808,459	$5,351,057
AGL	3.8%	$95,266,427	$3,620,124	$301,677	$892,633
Total	12.3%	$995,757,880	$123,256,983	$10,271,415	$30,392,133

That said, the privatised Victorian electricity market has worked very well and it really is a joke that WA is only just breaking up Western Power and full retail competition won't start in Queensland until next year. The two fastest growing resource-rich states are literally 10 years behind the game.


26. Bob Oatley's billion dollar ego

By Stephen Mayne

Rosemount founder and big spending billionaire Bob Oatley was profiled by Angus Grigg in The AFR Magazine last week and there was quite a theme about the lad being shy, retiring, private and under-stated.

However, the claim that Oatley is "the most private of Australia's buccaneering billionaires" doesn't stack up. Australia's lowest profile billionaires are Melbourne's Wilson family, who control the Reece plumbing empire. Other Melbourne-based billionaires who remain completely off the radar include the Liberman family, John Gandel and David Hains.

None of them have done high profile things such as buying Hamilton Island, winning the Sydney-to-Hobart yacht race or co-operating with a magazine cover story – as Oatley now has.

Grigg wrote that Oatley "has no tickets on himself" but the know-it-all billionaire then declared that "Southcorp had all the country's top directors...but they never taught me anything."

It sounds like Oatley was an intolerant dictator who for far too long supported his son-in-law and Southcorp CEO, Keith Lambert, as he completely stuffed the company. But then Oatley tried to blame the rest of the board: "I was willing to do whatever I could to help, but I don't think they wanted my help. They knew it all."

However, Lambert also eventually copped it in the neck but Oatley was quick to claim most of the credit for Rosemount's success. "He came into a company that was properly organised. I think when he was out on his own, when we merged with Southcorp, he no longer had anyone to guide him. He did what he liked. He certainly didn't refer anything to me. I was surprised with some of his decision-making."

So if Lambert didn't listen to his father-in-law, why did Oatley defend him to the last? "We fought for him for ages but, in the end, we just had to stand back and let him go."

It always seems to be someone's else's fault for Oatley who is so shy and modest that he's about to launch a new wine label called Oatley Estate. Says it all really.

Copyright © 2024 The Mayne Report. All rights reserved

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