While
the amount of money you make or lose in a year is important to watch,
the more relevant question to ask is: “what are you worth?” When BRW
publishes its Rich List each year, the annual profit or loss is never
considered – the only thing that matters is net worth. You won’t see
much focus in the mainstream media, but go to the bottom of this page from the budget and you’ll see a five-year projection of the Federal Government’s “net worth”.

Forget
about net debt and gross surpluses: the fact remains that, right now,
the Federal Government still has a negative value of about $33 billion.
And that’s after valuing the Government’s Telstra stake at $33 billion,
or $5.25 a share, when yesterday’s closing price was $4.82, valuing the
51.8% stake at $30.3 billion or $2.7 billion less than the budget.

But
the negative net worth is forecast to fall over the the next five years
and hopefully we’ll finally have a federal government worth zero by
about 2010. Yippee. At least that’s something to show from the biggest
taxing and spending government in history.

State and federal
governments love to deceive the public by talking about “net debt”, but
often they’re netting off assets that are actually earmarked for other
liabilities. This year’s budget once again makes the claim here, with net debt put at just $16.3 billion in 2004-05. But check out this chart
and you’ll see that by June next year the Federal Government will have
increased gross borrowings to about $45 billion. That’s hardly
eliminating the Commonwealth bond market when you’re still running the
biggest debt pool in the country. Incredibly, respected commentators
like The Australian’s Alan Wood still buy the government’s garbage as today he wrote: “But as Peter Costello pointed out again yesterday, debt has been eliminated.”

The
difference between gross and net debt is partly explained by the
Reserve Bank’s assets, but the fact remains that Australia has one of
the lowest levels of foreign exchange reserves of any top 50 economy.
Peter Costello was gloating on The 7.30 Report last night that
our budget surplus is one of the best in the world, but this ignores
our poor balance sheet and low foreign reserves. For instance, if the
tiny island nation of Singapore can build up an investment fund worth
more than $US100 billion, what on earth have we been doing?

The
claimed surplus of $8.9 billion is also about double the real figure
because Costello continues to not account for blowouts in unfunded
superannuation liabilities through the budget.

Go to this link
and you’ll see from table one that the annual superannuation expense is
expected to be a steady $2.4 billion a year (not $4 billion a year as
Finance Minister Nick Minchin claimed on Lateline last night) through until 2008-09. But unfunded superannuation liabilities are still projected to blow out as follows:

2004-05: $91.1 billion
2005-06: $95.6 billion
2006-07: $98.8 billion
2007-08: 102.0 billion
2008-09: 105.2 billion

When
Peter Costello became Treasurer in 1996, unfunded super was just $75
billion. The honest thing for the government to do would have been to
cap that unfunded liability at $75 billion and take budget hits for
whatever was necessary to stabilise it. If that meant trebling the
annual budget contribution to super from $2.4 billion to $7.2 billion,
then so be it. Instead, we’ve now got this so-called “Future Fund”
which only deals with legacy liabilities for public servants. A real
Future Fund would be putting money aside to meet age pension
liabilities across the community, not just for the federal bureaucrats,
primarily defence personnel who are owed about $60 billion of the
present $91 billion.

Here’s a suggested question for the
“mainstream media” to ask the treasurer today: “You’re budgeting to
spend $2.4 billion on public sector superannuation in 2005-06, yet even
after this, the unfunded super liability will blow out by $4.5 billion
to a record $95.6 billion. If you followed the same accounting laws
that you require of the private sector, wouldn’t this $4.5 billion have
gone through the budget, thereby halving your claimed 2005-06 surplus
of $8.9 billion to just $4.4 billion?”

Costello really shouldn’t be allowed to get away with this funny money accounting trickery.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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