The only thing more annoying than governments telling porkies about their debt levels is so-called guru commentators falling for it. Earlier this month, News Ltd’s Terry McCrann made the following extraordinary claim in The Weekend Australian in a column discussing infrastructure needs and regulation of where the investment dollar goes:
Now we have $650 billion in super funds and growing by $50 billion or more a year. There is, on one hand, a need for a place to invest that money. Enter the second biggest change: the almost total elimination of all government debt – commonwealth, state and semi-government; along with, of course, the almost total elimination of the actual semi-government entities themselves.
Now, I don’t know about you, but when Australian governments collectively have more than $100 billion of gross debt and almost $150 billion of unfunded superannuation liabilities, such a claim is laughable. Similarly, when governments still own more than $100 billion worth of “semi-government entities”, to claim this is “almost total elimination” is just embarrassingly wrong.
Where do you start in listing all the debts and assets that McCrann claims don’t exist any more? Take NSW as an example. The taxpayers still own more than $20 billion worth of water and electricity assets alone, and the state as a whole has more than $20 billion of debt outstanding as you see from this press release in January gloating that debt is at a four-year high.
Even the Commonwealth and Victoria, the two biggest proponents of privatisation, have substantial debts and government-business enterprises. Victoria still owns its water industry, the Port of Melbourne and the government-underwritten monopoly workers’ compensation and compulsory third-party insurance schemes which together have almost $15 billion in assets.
Jeff Kennett may have inherited a $33 billion debt and privatised about $33 billion worth of assets, but the state still has gross debt of $12 billion, as you can see from the Treasury Corporation of Victoria graph charting debt over the past decade.
McCrann’s comment suggests that the Commonwealth is some sort of cash machine that has something to rival the Singapore Government’s $US100 billion-plus global asset pool. Sadly, the last Federal budget confirmed that the Commonwealth is still worth negative $36 billion, the biggest factor being $90 billion in unfunded superannuation liabilities.
Despite this, government ministers love to make the misleading claim that they have “retired $73-billion of the Labor Party debt”, something Peter Costello repeated only last Tuesday on PM.
Firstly, when he was treasurer, John Howard handed over a $10 billion-plus debt to the Hawke government — so blaming Labor for that is a bit rough. Then you have the fact that since 1996, $20 billion has been ripped out of the Reserve Bank, more than $50 billion raised from privatisation, and unfunded superannuation has blown out by $15 billion to $90 billion.
Besides, the debt hasn’t actually all been retired and gross bonds on issue remain close to $40 billion. The Government considered using the proceeds from T3 to close down the bond market, but decided against it as you can see from this summary in the 2003-04 budget.