Page 1447 - Week 05 - Wednesday, 10 May 2006
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… too little focus is given to addressing persistent operating deficits.
This is not written by the Liberal Party; it is not written by the federal government. This is written by one of the world’s leading credit rating agencies, and it says:
Although the ACT’s fiscal strategy is adequate, it is not as stringent as that of some of its peers and lacks specific targets.
We were told about the failings of the Liberal Party, about what happened back in the nineties and how wonderful is the accounting standard we use, but the report says:
Under the accounting system preferred by Standard and Poor’s, the government is projecting large operating deficits. The ACT uses the Australian Accounting Board standard, which allows governments to count the capital growth of investments as operating revenue. Standard and Poor’s believes that this is not a true insight into the underlying fiscal position (a capital gain on a bond investment cannot be used to fund public service salaries) and so uses the method dictated by the Australian Bureau of Statistics (consistent with IMF guidelines).
This report is from a credible rating agency, the people who oversee the sovereign states around the world, who assess governments in all the major countries, and this is the view that they have offered. They go on about the budgetary performance. We were told that the credit rating agencies have got underlying confidence. Well, tell me how this reads as underlying confidence? It states, under budgetary performance, “weak operating position projected to worsen”. I do not know if somebody would want to pin their hopes on that meaning that they are doing a good job, but where I come from it does not look too good. It goes on to say:
The general government’s operating position is weak. Although the territory’s strong balance sheet provides a short-term buffer, continuation of such a position indefinitely is not consistent with an ‘AAA’ rating.
If there has ever been a warning from the international financial community to this territory, it is that. It says that our AAA rating is not consistent with the continued pattern of management that we are seeing in this town. Under the heading of “debt burden and net financial liabilities” it states:
Balance sheet position set to worsen …
Let us relook at this amendment of Mr Stanhope’s and “the continued confidence shown in the ACT’s balance sheet by rating agencies”. I do not know which rating agency, but I also met with Moody’s, and they do not even give a rating on the ACT. As far as I know, this is the only one that we have available to us. The amendment by the Chief Minister is based on obviously poor information, and I am sure some poor soul up in Treasury will be berated after this debate for not ensuring that he was up to speed.
Very clearly, the rating agencies do not give this territory a positive report card. They are sending concerns about the way in which this territory is operating and they are saying, “Get your house in order, get your expenditure under control or you’re going to jeopardise your AAA status.” That is an extraordinary position given the windfall gains
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