Privatisation has been an important policy tool for liberalising the provision of goods and services. Around the world, utilities, transport systems and other industries nationalised during the twentieth century were restructured along corporate lines and sold to private owners. However, explicit forms of privatisation – that is the sale of a public provider – is far less common within the welfare state. Instead, welfare state services have been marketised – that is, reorganised to reflect elements of competition. Marketisation often advances commodification, yet it retains a visible role for the state. Where other neoliberal reforms explicitly advocate replacing states with markets, marketisation requires a more nuanced account of combining states and markets. Perhaps unsurprisingly, this ambiguity has seen a much greater political and academic acceptance of variety within the ‘managed’ or ‘quasi’ markets that dominate social provision.

The complexity of understanding marketisation is evident in popular political understandings of some of Australia's key social services. Medicare, Australia's system of universal public health insurance, is broadly understood as ‘public’, yet it operates alongside a ‘private’ system and actively facilitates private medical provision. This structure was not the result of liberalising a more public system; instead competition was a key strategy for achieving universalism. Alternatively, Australia's system of childcare gave rise to the largest for-profit private childcare company in the world, ABC Learning, during a period of rapid expansion of provision and public spending. In both cases, Australia's experiences of marketisation partly reflect its wage-earner history, which left a legacy of weak public provision within the welfare state. Liberalisation coincided with strong political pressures to expand provision.

This chapter uses these two examples – Medicare and Early Education and Care (EEC) – to understand the political economy of marketising social provision. Advocates of marketisation view its integration of states and markets as a source of dynamism, allowing efficiency alongside equitable access (see Barr 2001; Le Grand 1997). Marketisation often reflects the interplay of fiscal politics and accounting anomalies that favour private provision. Here, initial marketisation is orientated towards underwriting profitability in otherwise unprofitable sectors.