Peter Costello was back pushing his debt free furphy with gay abandon on the ABC last night. Whilst his budget speech and the budget papers are careful to use the phrase “net debt” the language gets a lot looser in live television exchanges.
“Now we’ve got no debt,” the Treasurer brazenly told Tony Jones and Kerry O’Brien, as if the $50 billion debt pile described on this page in the budget papers didn’t exist:
Total Treasury Bond (debt) issuance during 2007-08 will be $5.1 billion, while scheduled maturities during this period, net of Australian Government holdings, are $2.9 billion. As a result, the total stock of Treasury Bonds on issue, net of Australian Government holdings, will be around $49.4 billion as at 30 June 2008 (Chart 5).
If you’ve ever wondered why the Future Fund is still yet to buy its first non-Telstra share more than three years after it was announced, this little accounting policy in the budget papers provides some insight:
Financial assets included in net debt reduce temporarily in 2007-08 (Chart 1). The change in the 2007-08 estimate is largely explained by the Future Fund progressively moving its assets out of cash and fixed interest securities, which are included in the calculation of net debt, into equities, which are excluded.
This brazenly admits to the double counting where the government nets off the Future Fund cash against its outstanding debt and then tries to claim the Future Fund assets are also set aside for unfunded superannuation liabilities. You simply can’t claim both.
It will be funny hearing Cossie try to explain some day that suddenly we’re in debt again because the Future Fund bought too many shares. Huh!
Whilst the education endowment is good policy, good politics and makes up for some of the neglect in higher education over the past decade, raiding the Future Fund of $5 billion is clearly irresponsibly policy given that unfunded super liabilities are rising faster than expected.
The following table shows projected superannuation liabilities have blown out by about $3 billion a year when compared with last year’s budget figures in brackets:
2006-07: $102.7bn ($99.6bn)
2007-08: 106.55bn ($103.4bn)
2008-09: $110.26bn ($106.8bn)
2009-10: $113.98bn ($110.5bn)
The game is no longer about having $120 billion by 2020. The liability will be $117.7 billion by 2011 and this chart shows a horrifying blowout in military super leaving taxpayers with an estimated liability of about $210 billion by 2046.
In other words, we’re stacking on the military numbers but future generations will have to pay for their world-leading pension schemes. For this reason, the real cost of the Iraq folly is much higher than the government admits.