Good reliable information is at the heart of a functioning democracy and yesterday’s budget wasn’t exactly a gold medal performance for honest accounting.
Labor was clearly keen to come up with as big a surplus figure as possible because it cranked up Reserve Bank dividends and continued to massively under-fund public sector superannuation.
Given Australia’s plunging foreign reserves after our central bank undertook controversial policies such as buying $15 billion of home loans from the Commonwealth Bank, I argued last week that Reserve Bank dividends should be suspended for the time being.
Ending soon: save 50% on a year of Crikey.
Just $99 for a year of Crikey before midnight, Thursday.
Instead, we got an $814 million increase in the projected Reserve Bank dividend for 2008-09, plus a one-off $150 million special dividend from Australia Post. The Cain-Kirner and Carr-Iemma governments were past masters at raiding government businesses to improve the budget bottom line, but it is very surprising to see this tactic being used so blatantly in the first Rudd budget when the overall surplus was strong.
Another classic Labor tactic is to broaden the scope of public asset valuations to claim as big a balance sheet as possible. Lo and behold, we got this on page 3-17 of budget paper No 1: “Net worth is forecast to be $86 billion in 2008-09…This primarily reflects the Government adopting a new accounting standard at this Budget which requires that defence weapons be treated as an asset.”
The AFR’s economic editor Alan Mitchell referred to “accounting fiddles” today without properly explaining it. There is no bigger rort than the way public sector super is funded.
The Future Fund was set up to cover the $110 billion unfunded super liability, which is now projected to hit $147 billion by 2020.
It really should have been called The Past Fund and Costello started the rort of continuing to book Future Fund earnings through the budget.
Lo and behold, the 2008-09 surplus got a $432 million increase yesterday as the government lifted its projected Future Fund earnings contribution to $3.5 billion, thanks to a $751 million lift in interest earnings.
Given the unfunded super liabilities are rising at about $3 billion a year and the government only expenses the cash cost of paying pensions, surely the prudent approach would be to allow Future Fund earnings to build up without pulling them back through the budget and artificially boosting the surplus by $3.5 billion in 2008-09.