Page 1428 - Week 05 - Wednesday, 10 May 2006
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MR MULCAHY: I was not part of the Carnell government, Mr Corbell, but I will come to that in a moment. It is based on the standard used by the International Monetary Fund. Curiously, it is not used by the ACT but, as reality breaks in, the ACT is coming round.
We have talked about credit rating agencies. It is interesting that Moodys, which I also met with, and S and P both reiterated to me that they prefer the GFS method of reporting because they look to uniform presentations and are certainly strongly committed to that point of view. Their concern about the continued use of the present favoured accounting presentation, AAS31, is that the matter of the revaluation of assets—it is not just land sales, as the Treasurer cited yesterday—can, in their words, lead to volatility in terms of the reporting of statistical data.
I am an adherent of the GFS system. I am not too fussed about what others in the past may or may not have thought about it. Certainly, the prevailing view amongst the majority of the state governments, the federal government, and the international organisations is that it is how we ought to report on our affairs. Gradually, the ACT is moving, I believe, to that position.
The reason that the GFS basis is used is, first of all, that it allows for comparability from year to year, whereas the system used by the ACT has been changed several times and probably will be changed again next year to bring it closer to the GFS method; and, secondly, that it includes only those transactions over which the government exercises legislative and policy control, but it does exclude revaluations—for example, movements in the value of the superannuation fund, asset write-offs and asset sales such as land sales—which simply convert one form of asset, such as land, into another, being cash.
Overall, the GFS provides a more accurate picture of the economic impact of the government’s operations. The GFS data shows that government spending will outstrip revenue by $394 million in 2005-06, not merely $37.4 million, which the Chief Minister would like us to believe. The Chief Minister is saying that by 2008-09, the year of the next ACT election, the operating result will be a loss of only $16.8 million, but his own GFS data shows that it will be, in fact, $332.6 million. So by 2008-09, when the people have the opportunity again to pass judgment on this government, the accumulated deficit will be $1,744 million, or $5,365 per person.
The main reason for the massive disparity between the figures that the government uses, which in any case seem to be being constantly changed, and the GFS projected outcomes is that the government treats money from land sales and increases in the value of its share portfolio as income. That, of course, is very misleading. It gives a false picture of the taxing and spending activities of the government. For that reason, the rating agencies are very committed towards GFS, as are the prevailing governments in this country.
This year, the government hopes to ease the squeeze by selling $159 million of land, but it cannot keep propping up its ailing finances by selling another paddock of the farm or by hoping for investment windfalls. The government’s dilemma was highlighted by the ominous warning from Access Economics in its recent State and territory budget monitor:
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