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Legislative Assembly for the ACT: 2002 Week 3 Hansard (7 March) . . Page.. 715 ..
MR QUINLAN (continuing):
Given these specifications, the commission has determined that the estimated end-of-year outcome for 2001-02, based on the administration of the previous government, would have produced a small deficit of $5 million. I hasten to add that that bottom line is inflated by some $17.8 million in land sales revenue that relates to prior years. So the real result is a deficit of $23 million. This is still not large in a $2 billion total budget. Nevertheless, I think it is fair to say that we now have objective opinion that this year's budget represented a deficit of $23 million at the end of this year. Of course, this result could fluctuate with minor shifts in quite a number of estimates. I have to say in favour of the previous government that accounting is not a perfect process and it can from time to time convey a false aura of precision, and I think I referred obliquely to that in question time.
The decline in the result from the original budget today is in large part attributable to losses from superannuation investment. Results in previous years from superannuation investments were flattered by windfall gains in investment. The law that what goes up must come down quite often applies. As I have repeatedly warned in this place, superannuation investment returns are a volatile beast. Prudent reporting calls for the separation of superannuation investment from general government operations and I will be investigating during the course of this Assembly ways of improving financial reporting. I cannot give a promise that I can do anything because I cannot breach accounting standards unfortunately but I will give it a shot.
If members are busily going through the report looking for a simplistic line that we have peddled to the media, I refer them to section 7.3.1 on page 47 where the report identifies the return on superannuation investment. If you take that investment away, if you excise that from the operating result, as you should, then you will find that at this stage we are actually running in continual deficits, that in fact the budget will run in deficits.
I complained in question time about the lack of depth of analysis of ACT finances. In respect of superannuation, we are investing extensively within a notional sinking fund recommended by the actuary. With a sinking fund you are required to contribute capital progressively. You retain interest earned in that fund and those two elements combine to meet your future liability. If you spend your interest along the way, what you are doing is in fact not providing fully for that liability.
I think it is important for once in our lives to try to come to terms with the fact that we reported a year or two ago quite substantial surpluses but they were windfall gains in our investment, they should have been in the sinking fund, they should not have been taken into account and they should not have been spent. So we still have a way to go.
Mr Humphries: Will it change the accounting arrangements?
MR QUINLAN
: I will be trying to change the accountancy, Mr Humphries, but I am forced, I think, to try to do it within current standards, and that may not necessarily be easy. I think it is the case that we are the only state or territory jurisdiction in Australia that intermingles our superannuation with our operations. So I will be looking to change that. Unfortunately, that is not going to bring a pretty result. It is still going to leave this territory with a way to go. But at this stage, the way it is set up means that our bottom line is very fragile. It just seems to me to be commonsense and in the interests of both sides of the house to come to terms with this problem. I have only been talking about it
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