Market Forces – do we need them for ferries?

The thought that the market can do anything better than the public sector has become pretty unpopular in the last six months. Nevertheless, I still believe it. And I’m going to illustrate it today with one public service that is pretty close to being a basket case; Sydney Ferries.

Sydney Ferries has a terrible history of poor management. I’ve worked long enough in the private sector to know that there are many poor managers in the private sector. The difference is, though, that there are consequences. Not just at the very top of the organisation, but all the way through. Because ultimately, if a privately run company is poorly managed, it goes bankrupt.

We’ve lived on a ferry route for more than 10 years now. In that time, the demographics of Sydney (particularly on the harbour) have changed enormously. Pyrmont has become one of the most densely populated suburbs in Sydney. Luna Park has reopened. Abbortsford, Homebush Bay, Cabarita and much of the inner west has had huge apartment developments.

And Sydney Ferries had not changed the timetable of any route (let alone added new routes) in any significant way. Except that this week, the Manly Jetcat was cancelled.

So quite a number of private services have opened up – particularly on weekends. So if you are a tourist, you can now catch a very convenient service from Darling Harbour to Circular Quay (via Luna Park) every weekend. You can catch quite a fast service to Manly on the weekend. And you will pay more than you would pay Sydney Ferries. This is in spite of the fact that Sydney Ferries is subsidised to the tune of at least 30% of the total ticket revenue. And Sydney Ferries gets the best wharves to go from for the tourist market.

But for Sydney Ferries, the consequences of failing to maximise revenue are fairly small. There are far more consequences for spectacular ferry crashes (whether or not people are hurt). So the people who live on the water who might commute to the city from Pyrmont continue to catch buses and clog the roads. And the tourists who might catch ferries all over the harbour continue to give up on the queues and inaccessible timetable of Sydney Ferries and continue to catch the private services available to them.

The market, in this case, would give a better incentive to good management than the present method of media outrage does. It would be hard to set up good market incentives in this case – but perhaps giving private services the same incentives available to public sector managers would be a good method.

I love catching Sydney Ferries. I do it as often as is practical. But the opportunities to do so are not as available as they would be if there a few more incentives for the people managing Sydney Ferries to increase the number of passengers travelling on Sydney Harbour.

  1 comment for “Market Forces – do we need them for ferries?

  1. January 6, 2009 at 5:42 am

    Hmm. I think the market can do some things better than the public sector – but it needs close public regulation and incentivization or small bus routes get closed down, safety standards are compromised out of greed rather than laziness (the privatization of the maintenance of London Underground has been a very mixed experience, British hospitals are now filthy because the cleaning has been contracted out to the lowest bidder with cost being the most important factor…) and the poor get shafted every which way – think about US health care provision. Having said that, I groan under the heel of public sector attitudes as I struggle to run my little commercial enclave in the midst of a public sector monster of unaccountability.

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