Peter Costello loves to trumpet his debt and deficit record in government but how good is that record when you consider the full record on privatisation?
March 1 sealed section
We were most interested by the expansive Barry Cassidy interview with the Treasurer on Insiders last week: http://www.abc.net.au/insiders/content/2004/s1055590.htm
Check out this exchange:
BARRIE CASSIDY: But when Keating did put this on this agenda and took that initiative 12 years ago. What has happened in the interim that can match that in terms of significance?
PETER COSTELLO: Oh, well, he never did an intergenerational report. It hadn’t been thought of. We don’t want to spend our Sunday mornings talking about Paul Keating and what he did 13 years ago, Barrie, but I will make one point – nothing could be more damaging to funding the ageing of the population than running budget deficits. You realise something by moving into surplus budgets and repaying our $60 billion of debt we have given future generations a $60 billion head start that they didn’t have previously. Now, what I say in this paper is they are going to need it because without change they are going to be down $40 billion per annum. Per annum. This is the dimension of the problem that we are now looking at in 30 or 40 years time. So what I’m doing is I’m saying: “Okay, we have made some great strides in the financial sense, but let’s go further.”
BARRIE CASSIDY: But given the size of the problem, is a 9 per cent compulsory contribution big enough?
PETER COSTELLO: Nine per cent compulsory contribution for somebody, as we say in our paper, for somebody on medium wage will give them after 30 years of contributions, 76 per cent of their income in retirement.
CRIKEY: Indeed, the Keating policy would have lifted super contributions to 15 per cent by now. And why has it taken all this time to merely produce a report and announce what are fairly minimalist changes.
You then have former Costello staffer turned backbencher Tony Smith hammer home the debt and deficit points in the Insiders Adjournment debate later in the program:
TONY SMITH, MEMBER FOR CASEY, VICTORIA (LIBERAL): This coming Tuesday marks the eighth anniversary of the defeat of the Keating Government, a good time to remember how things were and how they could be again. Back then home mortgage interest rates were 10.5 per cent, compared to around 7 per cent today. On an average mortgage that’s a saving of $500 or more every month. Unemployment was nearly 9 per cent. Today it’s below 6 per cent. Government debt was $96 billion. Today it’s down to $29 billion. And that’s freed up $5 billion every year to be spent on services instead of Labor’s interest bill. Forget what Labor says, just remember what they did, because what they did is exactly what they’d do again. The cost of Labor is always too high. High interest rates, high debt, high unemployment and high taxes. I’m Tony Smith.
CRIKEY: This will be a key issue in the upcoming federal campaign and we need to get a couple of points on the table. Firstly, how much of the claimed $67 billion reduction in public sector debt is from one-off asset sales such as Telstra, the Commonwealth Bank, Sydney Airport and the like. We’ll get the exact figures but it would appear to be between $50 and $60 billion. You then have the $13 billion blowout in unfunded superannuation liabilities over the past eight years. It is now a quite dissgraceful $85 billion black hole and if Costello is urging action on the ageing then he needs to start propertly funding public sector superannuation. You then have the budget raids on the Reserve Bank which have totalled about $20 billion since 1996 and left Australia with one of the lowest levels of foreign reserves of any comparable country in the world. Given all this and the fact that the Howard Government is the highest taxing outfit in history, it is worth reading Hillary’s latest tax piece on the site here: http://www.crikey.com.au/politics/2004/03/01-0001.html
March 2 sealed section
Further to yesterday’s piece about Peter Costello’s claimed $67 billion reduction in Commonwealth debt, we’ve dug up some detail on various privatisation deals since 1996.
This National Audit Office paper goes through some of the privatisation issues:
Here is a list of the proceeds received and then an estimate of what the asset is worth today, but remember some of these are real back of the envelope jobs.
Telstra: $30.24 billion received and current value $31 billion
Australian airports: $8.5 billion received and current value about $10 billion
Commonwealth Bank: $5.15 billion received and current value $16 billion
Reserve Bank gold assets: 167 tonnes sold for $2.4 billion, now worth $2.14 billion
National Rail Corporation and Freightcorp: $1.05 bn received, current value $2 billion
Broadcast Australia: $650 million received, current value $1.2 billion
DASFLEET: $407 million in 1997, now worth $500 million
Telecommunications spectrum: about $1.3 billion received, worth $200 million
Radio licence spectrum: about $1 billion received, worth $700 million
Property portfolio 59 sites: for $1 billion, worth about $1.2 billion
Total value from sales: $51.7 billion
Assets today worth: $64.9 billion
The mobile spectrum sales is the most clear cut victory for taxpayers as One-tel went broke and Hutchison has been a huge disaster after they together paid about $1.2 billion for 3G spectrum in 1999.
The Commonwealth Bank has been the biggest disaster after taxpayers offloaded their residual 499.1 million shares for an average price of just $10.32, compared with today’s price of $31.95.
Property dealings are also quite interesting. The size of the federal public service plummeted by 67,000 or 37 per cent between 1986 and 1999. However, Federal property ownership has all but disappeared over this period. In 1976 under the Fraser Government, the Feds owned 51 per cent of the office space it occupied. By 1996 this had fallen to 34 per cent and now virtually the only building left in Federal hands is Parliament House. They’ve even sold Defence headquarters at Russell Hill.
This is a very interesting paper on the government’s property privatisation program:
You’ll notice that it suggests the great property firesale of the late 1990s was not in the public interest as the 59 properties were sold for $140 million less than book value and many of them have now been substantially revalued upwards by the new owner.
The composition of the Federal balance sheet along with spending and tax levels is a topic of great interest in the coming months and we would welcome your feedback.