5 July 2018
TRANSCRIPT: STANDING COMMITTEE ON THE ENVIRONMENT AND PLANNING
Inquiry into the proposed long-term lease of land titles and registry functions of Land
Mr David Davis — Chair
Dr Samantha Ratnam
Mr Karl Fitzgerald (affirmed), Project Director, and
Mr Jesse Hermans (affirmed) Administrative Assistant and Researcher, Prosper Australia.
— I welcome Jesse and Karl as the representatives of Prosper Australia. Can I ask you to give a short presentation, and then we will follow up with some questions.
— Certainly. Thanks for this opportunity. It is fantastic that we are finally seeing some detail on what is happening with this privatisation, something that we are very concerned about because for a property-owning democracy this is akin to privatising the police force. We have real concerns because it makes no sense economically and no sense in terms of our sovereignty, nor in terms of political vision.
We were struck by the fact that the land title registry privatisation was announced at the same time as the need for $2 billion for the domestic violence program, which is very important. But when you consider that so much financial pressure comes from the cost of housing, we feel there are some concerning possible loopholes in this privatisation that may well act as a barrier to further analysis of housing affordability pressures. That is why I was very impressed that you finally got some detail from DELWP and Ian Ireson, the CEO there, on whether or not they had really considered the future potentials of data aggregations. We see billion dollar companies like CoreLogic charging a fortune for aggregated data. What we can understand so far is that, sure, the statutory fees have a government approval rating and non-statutory fees are linked to CPI, but there is a lack of detail surrounding whether the sort of state-wide cost of data analysis will be turned into some sort of product that will be sold at exorbitant costs.
At the moment CoreLogic charges us $3500 for six lines of data and $6000 for a spreadsheet with 387 rows of data on it. The Victorian housing affordability policy wonks, if you like, are already concerned about the incredible cost of data, and we are having to rely on second-rate data providers. Basically the housing community is reliant on one university-funded organisation which is paying six-figure sums for access to this data. Everyone is relying on this Australian Property Monitors-type data, which is not as good as CoreLogic’s, but we wonder what the flow-on is going to be of further privatisations.
We would really like to see whether there is some sort of public interest scope for affordable data access. When I saw Mr Ireson talking about the Valuer-General’s data being possibly made available to LANDATA I thought that was an extra half a billion dollars’ worth of value being added onto this sale. Was that incorporated into the clauses of this contract? We have seen many past privatisations, such as the pokies, where the system has been gamed and the public interest has lost out.
Our core concern is that the public interest access to this data will not be pushed up even higher so that as we enter this era of geospatial analysis — we had visions that we would be able to animate flyovers of the Western Distributor, for example, showing which landholders were set to gain from this infrastructure project. With processes like this and the lack of detail right from the business case onwards, it really does not fill us with confidence that the government is acting in the public’s best interest when every day we are seeing new stories of computer algorithms delivering all sorts of analytical options for property investors to make use of but the general public and universities are probably all struggling to afford this. It is akin to putting a pot of gold on the table and looking the other way — saying that the government does not know whether they are including the Valuer-General’s data to the LANDATA website. So we are very concerned about that.
When it comes to our sovereignty, of course ensuring that the Victorian public controls that data, whilst we understand that with the privacy rights there will be strong overviews there from government, it is the economic value of that data that has been turned into multimillion-dollar products by this California-based company, CoreLogic — a multibillion-dollar company WHICH HAS grown in the last 15 to 20 years, so who knows what potentials there will be in the future. To talk about the economics of this sale, I will hand it over to Jesse.
— Thanks, Karl. In terms of the commercialisation or the concessions, based on what we have seen from the Department of Treasury and Finance presentations and I think something from DELWP, as I understand it the government has sort of put forward two main reasons — the first one being it wanted to rationalise this balance sheet, so to speak, through asset recycling, and then the other reason being it wanted to get more private sector innovation into the land titles office,which is not necessarily a bad thing. It sounds reasonable. But in terms of the former, it needs to be made clear that commercialising even this very small portion of the land titles registry — it is not a funding exercise, it is a financing exercise, because the government is sacrificing a revenue stream for an up-front lump sum.
When we looked at the estimates, which we know are just rough estimates because they cannot put it out what they expect it will be — from what I have seen from presentations, in the estimates there is just like a rough number — based on an estimated value of maybe $1.5 billion to $2 billion or something as a sale value, and they are handing out about $120 million in annual revenue, I think it is like 30 per cent based on the DTF estimates. We are looking at a yield of about 6 per cent, whereas the government can borrow at a rate of about 3 per cent over 10 years for 10-year bonds, so that is a difference of about $60 million per year. We are not even counting in future revenue growth as well for potential innovations that the public ownership of the —
The CHAIR — Only CPI increments, I think.
Mr HERMANS — Okay. Only CPI, all right; fair enough. But even so we are looking at about $60 million, conservatively, of forgone revenue every year that the government could have retained if it had not leased the land titles registry but retained it and issued bonds instead. So that then begs the question: is this exercise really worth $60 million every year? I am not sure if that has been justified.
In terms of achieving maybe extra innovation and so on through private sector engagement, that could be a possible argument, although I do wonder if this is the case or this is a good reason considering the length of the lease is 40 years. I wonder if that is really necessary. A 40-year lease is a long time because a lot can happen in the world of data and information technology within the space of 10 years, let alone 40 years. A 40-year length of a lease — considering that New South Wales had only a 20-year lease and I think South Australia had a longer lease, over 30 years, but then they had the hidden provision in the business case that was not revealed until after the sale. We do not know what is going to be in this because we cannot see the actual business case that was being proposed and whether or not something similar is going to be put in for either first dibs on the motor vehicle registry or an extension of up to 40 years as in the South Australian example. These lease term periods are incredibly long for something that just seems to be an exercise of, ‘Oh, we can just get the private sector to come in and maybe make some innovative product changes and stuff and optimise the use of the data’.
That seems like way too long a period for something as simple as that. So there is definitely a problem with the length of the lease, from what I can see, and also the financing argument of saying, ‘Oh, we need to rationalise the balance sheet’ and essentially give up $60 million in revenue.
Read the full transcript – it was quite a robust discussion!