The mainstream media has failed to pick up the deep flaws in the Bracks Government’ pre-election Budget update. Today, shadow Treasurer Robert Clark responds to Crikey’s demolition job on the dodgy document.

Congratulations on yesterday’s article.

As best we can make out:

* The TAC dividend payment this year will be $90 million, being the balance
of the “Reserve for Accident Prevention Blackspot Dividend” shown at note 15 to
the TAC 2002 annual report (p.42). We were told by Treasury officers that this
was already in the budget in May, and that it is unchanged.

* The maximum the one-off gas sector dividend can be is the total equity of
Gascor Pty Ltd, which is the body that purchases natural gas from Esso/BHPP and
sells it to non-contestable customers. That equity (all consisting of retained
profits) stood at $39.336m at 30/6/02. Gascor paid $66m of dividends in 2001-02
(Annual Report, p.18). We do not, of course, know what dividend in 2002-03 was
included in the May budget, nor do we know what profits Gascor is expected to
make before full retail contestibility is introduced in “the second half of
2002” (p.3) Their profit for 2001-02 was $86,499 million.

* According to a Candy Broad media release of 21/6/02, the gas industry was
given an additional year to prepare for Full Retail Competition, until 1/10/02. I
understand FRC did actually start on 1/10/02, but with no fanfare. Arguably,
therefore, Gascor could have made one quarter of its 2001-02 profit, ie: around $21.5
million. If the Government took all of this plus 30/6/02 equity as a dividend, it could
total around $61 million.

* Since the total increase in dividend since May is $140.8 million, the
balance, around $80m, would seem to come from increased dividends decided on
since May for the the metropolitan water industry. This $80 million is a
conservative figure, because the Government might not be planning to take all the
equity in Gascor, and because presumably they had some dividend from Gascor
included already in their May budget

* Of the three metro water retailers plus Melbourne water, in 2001-02
dividends paid were as follows:

– Melbourne Water – $98.942 million

– City West Water – $54.750 million

– South East Water – $62.300 million

– Yarra Valley Water – $52.693 million.

(Source: 2001-02 Annual Reports)

* Thus the water industry dividends would seem to have increased by around
one third – more if there is a less than the maximum increase in the dividend being
taken from Gascor.

* At the same time as expected 2002-03 dividend has increased, the expected
2003-04 dividend has been cut, from$356.8 million to $274.4m. Is this just
co-incidental and due, for example, to continued investment losses since May. Or
is it a deliberate pull-forward?

On another aspect, the cost of the poll was in the May budget at $43.4 million
(page 208 2002-03 budget BP No 3). I questioned in my budget reply speech in
Parliament in May why it was that the cost of the election was being provided
for at a time when the Premier was promising to go his full term!

Since the election is being held only three quarters into a full term, up to one quarter of the $43.4 million is an unnecessary waste of money.

With best wishes

Robert Clark.

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey