Australian Industry: Commonwealth Bank
in Australia. This is partly due to the effectiveness of the ‘performance based incentives’ system. The profits don’t end there, for the Government also benefits directly from the privatization. This is because Privatizations are usually organized as auctions, where bidders compete to offer the state the highest price, creating real income that can be used by the state as investment capital.
Commonwealth Bank – Profit Details
2001 2002
Revenue $8.824b $9.068b
Expenses $7.396b $6.016b
Pre-Tax Profit $3.405b $3.572b
Income Tax $993m $916m
Net Profit $2.398b $2.655b
Earnings Per Share $1.896 $2.093
Dividend Per Share $1.36 $1.50
Table 1: Commonwealth Bank Profit Details (Financial Review)
Relation to Government - The benefits governments gain from privatizing companies extends further than just receiving money from the sale of the assets. The improvements in company efficiency not only removes the financial burden from the government but also help to strengthen the Australian economy. This is done through the creation of new capital and the specialization of the labour force. These two factors are significant in providing and maintaining a strong economy.
Conclusion - The implications of these results are that governments contemplating privatization of state-owned enterprises are required to fully privatize, in order to achieve strong gains in efficiency, profitability and stock market performance. The keystone in the success of privatization is the ‘profit motive’ which is responsible for improvements in efficiency and functionality of the business. The Privatization of the Commonwealth Bank of Australia is a perfect illustration of the benefits available in not only the end product, but also in the process involved. So the privatization of public owned companies can be beneficial to, and successful in, creating a stronger economy.