What better way to finish the year than to make a $56.2 billion accounting blunder. So it was yesterday when I wrote the following:

One of the government’s most important weapons against the opposition is the claim that it has “paid off Labor’s $96 billion debt”. Have a look at the net debt and net worth page from yesterday’s update and you’ll see that forecast net debt as at 30 June 2007 has actually blown out from $22.1 billion to $28.1 billion.

Whoops, that figure was actually a negative, meaning the government is claiming it will have net cash of $28.1 billion by 30 June, 2007 and that the position has actually improved by $5 billion since the budget.

However, it does remain absolutely true that the government has not “paid off Labor’s debt”. Check out this page from the Australian Office of Financial Management and you’ll see that, as of 30 September 2006, Peter Costello’s debt manager has $55.3 billion in gross debt outstanding, $17.85 billion on deposit at the Reserve Bank and a net debt position of $37.4 billion.

Similarly, rather than “paying off Labor’s $69 billion unfunded superannuation liability” from 1996, Costello has instead allowed it to blow out to $101.3 billion and overstated his budget surpluses by about $30 billion in the process.

Faced with strong cash inflows from privatisation, booming tax receipts and a desire to maintain a viable federal bond market, Costello should have followed the example of Jeff Kennett’s Treasurer Alan Stockdale and started pumping cash directly into the superannuation funds. Stockdale reduced Victoria’s gross debt from about $33 billion to $6 billion and slashed unfunded super from $18 billion to $11 billion in a performance which outshines anything Costello has achieved.

However, the CEO of the main public services funds, PSS/CSS, is former Australian Services Union official Steve Gibbs and it is clear that Costello did not want to give his own workers control over their superannuation entitlements. Gibbs is a good operator but in establishing the Future Fund Costello has expressed a lack of confidence in his ability while also allowing himself to grossly distort the accounting of his own budget performance.

Even the naming of this venture is flawed because it should be called a “Past Fund”. Once the $101.3 billion of already accrued liabilities are fully funded in more than ten years’ time, Prime Minister Costello could then indulge himself with an accurately described “Future Fund” to deal with things like old age pension liabilities.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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