The Treasurer has cobbled together a survival plan for the next few years.
Short on vision but at least an attempt to confront our problems, however ill defined.
It is a timely recognition that fiscal austerity measures are not confined to SBS News reports.
It is not beyond credulity that a Government would choose to withhold information about our true situation.
The Treasurer didn’t disappoint.
The Treasurer overplays the victim card by constantly claiming our woes are due to the fall in GST receipts, omitting to mention that additional grants from the Feds have more than covered the shortfall.
The Treasurer also talks about the absence of hay in the barn and that its removal was due to the need to maintain services.
She omits to mention that the hay in the barn was not just for a rainy day, but specifically to meet future liabilities such as our $5 billion unfunded superannuation liability (the SPA account) and our self insured liabilities for all our public employees and assets (the Risk Management a/c TRMA).
Right now there’s supposed to be $1,452 million in SPA and $174 million in TRMA, a total of $1,626 million. And at least $600 million in other Trust accounts and agency and department working accounts.
Let’s say $2,226 million in total.
But there only $567 million in actual cash in the bank.
Where’s the missing $1,659 million?
It’s been borrowed by the Government.
The Temporary Debt Repayment Account (TDRA) has a balance of at least $1,673 million, an estimate given by the previous Treasurer in November 2010.
But does this figure appear anywhere in the Budget Paper? Is the amount of internal borrowings undertaken by the Government——- described as feeding out hay from the barn——readily available?
In a word, no.
We’ll just have to wait until the Treasurer releases her Annual Financial Report in November. It will be buried in a schedule at the end of the Report.
Meanwhile the Treasurer claims we’re net debt free.
Even though we’ve borrowed $1,673 million from amounts set aside to fund future liabilities for superannuation and to meet self insurances payouts.
The question of State self insurance needs came to prominence after the Queensland floods when the Federal flood levy was mooted. Senator Xenophon insisted that States should be required to insure their assets.
Our Premier responded by saying that wasn’t necessary——we had our own self insurance scheme.
Indeed we do.
But just because funds have been provided, doesn’t mean that there’s cash available.
It’s been borrowed by the Government, just like amounts set aside to extinguish unfunded superannuation, in the SPA account.
The only way for the Government to reduce the TDRA, to restore real cash into SPA and TRMA, is to generate cash surpluses.
The Treasurer’s Budget offered no hope over the next 4 years.
Along comes Will Hodgman: The Liberal Alternative Budget 2011/12
It surely must be incumbent upon Opposition Leaders to unravel and analyse the current situation before proposing alternatives.
Not so with Will apparently.
Will has proposed and I’m quoting from his media release “over 5 year rolling periods, the general Government net operating balance will be in surplus and equal to the medium term sustainable level of net infrastructure investment”.
Is that reasonable? The last 3 years 2008/09 to 2010/11 have seen net operating balance far less than infrastructure spending, because of the spending-the-hay-in-the-barn effect, so it may be unfair to look at those years.
But what about 2007/08, a great year, when the Airport was sold?
In that year the net operating balance was $53 million, the last time we saw a positive number. But the net amount spent on capital and infrastructure was $184 million.
In the next 4 years even with Will’s alternative budget strategy the net operating balance doesn’t come remotely close to covering net capital and infrastructure investment.
Great strategy Will.
Will sets out his savings over the next 4 years but is completely silent on the level of capital infrastructure spending. Assuming it’s the same as Lara’s, there will be a continued run down in cash balances as the net operating balance is little different than Lara’s.
This means that the TDRA will grow if anything, just like it will with Lara.
More internal borrowings before we can even think about clearing the slate.
Now to take a look at another of Will’s strategies, to ensure “the General Government sector is kept net debt free and financial assets will exceed gross debt by $300 million over a rolling 5 year period.”
The level of net debt as measured will be below $300 million for both Lara and Will over the period of the forward estimates.
The fact that there is little change in the excess of cash and other financial assets over net debt is confirmation that a reduction in the TDRA will not occur, as only surplus cash will reduce it.
Another of Will’s fiscal objectives is to ensure “Government superannuation unfunded liabilities are equal to zero by 2035.”
This requires cash surpluses first to repay the TDRA and then to resume the setting aside of cash amounts to extinguish the liability currently estimated to be in today’s $s at least $5 billion.
The spreadsheet submitted as evidence in today’s Media Release suggests that no such cash surpluses are available in the next 4 years, not even a single $.
So how is Will going to set aside $5 billion?
Will clearly doesn’t understand the difference between profits, or net operating balances, and cash flow.
Will’s document may have superficial appeal but as soon as the fiscal strategies are analysed and the supporting spreadsheet examined, it fails badly.
It’s not a plan. It’s a joke.
Running a milk bar might be too much of an ask.
Maybe a school tuck shop?
There should be at least 20 more of those if Will gets his way.
On Tasmanian Times:
Jarvis Cocker: Not the GFC: 12 years of Labor neglect, Stupid