Even more amazing than the media’s sudden embrace of huge public sector
debt
increases is the fact that governments across the country have somehow
created
the delusion they are debt free. Michael Egan, the former NSW Treasurer
who created the current financial mess, had a classic letter in The AFR yesterday which baldly claimed that “the state’s actual general government net debt is now zero”.

Bollocks! Check out page 4-5 from this section
of the NSW Budget papers and you’ll see that gross government sector
debt is forecast to be $13.68 billion by 30 June, 2006. For net
debt to be zero, the NSW budget sector has to have $13.68
billion in cash or cash equivalents sloshing around somewhere, and
there’s no sign of that in the current crisis.

Even using dodgy public sector accounting, page 1-13 from this section
of
the NSW budget papers claims that net budget sector debt was $2.3
billion as at 30 June, 2005, and no one is claiming NSW is headed for a
cash surplus of $2.3 billion in 2005-06. So much for “zero”. But what’s
$2.3 billion between
friends when we’re talking hoodwinking that runs to tens of billions
across the country? Only a Labor Treasurer could claim billions in debt
don’t exist, a bit like the $600 annual payment Mark Latham and
Wayne Swan claimed wasn’t “real”.

However, Liberals are also partial to multi-billion dollar accounting
ruses. Peter Costello’s contribution to this Australia-wide phenomenon
of misleading public sector financial reporting has been his $29
billion blowout in federal unfunded superannuation liabilities to $98
billion, which hasn’t been run
through his Budget bottom line – something which would be illegal if
tried by a public company.

Michael Egan’s dodgy debt dealings in NSW also extend
to forcing public trading enterprises to borrow billions to pay dividends
to the Budget so that an “operating surplus” can be reported. The scale
of this scam has amounted to $7.5 billion since 2000, because that’s how
much the budget papers claim “net debt” has increased in NSW PTEs over
the past six years. This, of course, starved the electricity, water,
ports and transport companies of capital – something we’re all paying
for now.

Public sector accounting is one of the great scandals of Australia. The
ACT finally came clean with a more honest set of accounts this week and
look what happened – the toughest budget since Jeff Kennett’s effort in
1993. The Labor Party cannot hide the mess it has made of NSW finances
any longer, and the media should be hounding them to come clean.

Liberal Party fixer Michael Kroger memorably claimed that the Liberal
Party at a state level has been confined to the receiver-manager role
whereby voters will only elect them to fix up a monumental Labor
financial mess. The conservatives might have lost 19 straight state and
territory elections but NSW is now truly in need of a dose of tough
love – although severe doubts remain over whether Peter Debnam is the
man for the job.

Peter Fray

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