Page 2285 - Week 08 - Tuesday, 28 August 2007
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I have repeatedly pointed out to the government that the reported headline operating performance of the territory should not include expected long-term capital gains and superannuation assets. Whilst I acknowledge that it may be appropriate to report them to be consistent, the inclusion of this item in the government’s publicity on the budget is clearly misleading and gives a view of the government’s operations which is in fact unsustainable.
Superannuation assets are set aside to fund benefits that have already accrued to current and former ACT public servants. These assets cannot be used for general government expenditure. Indeed, the superannuation entitlements owing to current and former ACT public servants are currently under-funded. As of 30 June 2007 they are estimated to be 65 per cent funded by superannuation assets, as reported on page 154 of budget paper No 3. These assets essentially belong to public servants. Therefore it is highly misleading for expected long-term gains on these assets to be used to mask the government’s reported operating performance.
There is mounting support for the opposition’s contention on this issue. The position is supported in an article in the Canberra Times by Emeritus Professor Allan Barton, an expert in financial accounting and public sector accounting. Professor Barton states:
Reporting the net budget result as $103 million provides a misleading picture when it is actually $13.5 million.
The justification used by the Government for adding the expected net capital gains to the budget balance is that some state governments do so, and makes the ACT budget comparable with them. While this may be so, the use of an incorrect practice is not supportable.
Rather, comparability is better obtained by eliminating the item from the budget balances of all state governments, as required by the uniform presentation framework.
Even the Chief Minister himself conceded in committee hearings—
Mr Stanhope: You’re going to go it alone in government, are you, Richard?
MR MULCAHY: I remember hearing all this nonsense a couple of years ago. I went and met with people in Standard & Poor’s. I was howled down for that until I produced this rather damning assessment on the territory’s credit rating and the looming threat of downgrade. I was told, “Oh, this GFS is nonsense.” I was told we had to stay with the AAS system. Then, lo and behold—at the very next budget—it is announced that this is the new change.
I predicted that it would happen. The credit reporting agencies made it very clear they would not put up with this arrangement without adverse consequences. I am now being told, “This is a crazy idea of yours Mr Mulcahy.” But we will see how time plays out. The point made—not just by me but many others, including in this case Professor Barton—is that we need to have a true record of the performance of state
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