Whilst British Prime Minister in waiting Gordon Brown last night delivered his latest impressive big picture speech
at the UN overnight, his Australian equivalent is running around making
silly statements about oil prices and releasing even sillier studies
about the federal government’s debt position.

A cosy interview on Channel Nine’s Today Show yesterday opened as follows:

KARL STEFANOVIC:Well today, you get to do what many Australians only dream of and that is to
pay off the mortgage.

COSSIE: Yes, we started with $96 billion. That was the Labor debt when the Government
was elected in 1996 and over 10 years we have been working to pay it off and
today we go debt free. And what that means for people is that no longer do we
have to raise taxes to pay the interest bills or to re-pay the Labor debt, that
we have gone debt free and we have got a lot more options and a lot more freedom
for the future.

It is amazing how many other supposedly credible commentators have
fallen for this stunt when the Federal Government still has more than
$50 billion in bonds outstanding. It literally hasn’t “paid off the
mortgage” or “retired all debt”. To make the stunt stack up, Cossie then has to try and claim that
the government has more financial assets than debts.

But in doing this he should reveal that the government has one of the
smallest foreign reserves in the developed world, largely because
almost $20 billion has been raided from the Reserve Bank since 1996 –
all to help make this bogus debt claim.

And if you are going to start trying to negate certain assets with
liabilities, it is only fair to bring in all assets and liabilities and
look at the government’s overall balance sheet. When you do this,
Cossie’s outrageously reckless $29 billion blowout in unfunded federal
superannuation liabilities to $98 billion over the past decade makes a
mockery of the exercise.

And what about the $12 billion-plus of debt sitting inside Telstra. Remember this press release
from April 1997 when the Government announced Telstra would borrow $3
billion to make a special contribution to the budget before
privatisation. That’s in addition to the $8 billion-plus in dividends
that have been ripped out by the government since privatisation.

The real figure to consider is net worth and this is what the government’s own budget figures show it has presided over:

Negative net worth of Federal Government

1996-97: -$74.35bn

1997-98: -$68.54bn

1998-99: -$76.15bn

1999-00: -$40.55bn

2000-01: -$43.30bn

2001-02: -$48.32bn

2002-03: -$53.25bn

2003-04: -$39.59bn

2004-05: -$31.98bn

2005-06: -$27.78bn

Costello should shut up until he can come out and say the government is
actually worth something – anything. At the moment, rather than being
debt free, the Federal Government remains Australia’s most insolvent
institution, albeit one with a taxing power that allows it to continue
meeting its obligations.

Peter Fray

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