I was in Brisbane on Friday at the Australian Conference of Economists and heard the Treasurer Curtis Pitt announce his plan to shift $4.1 billion of debt from the General Government sector to the energy Government Owned Corporations. He argued that this would save up to $600 million in interest payments over the next four years.
Of course all it actually does is shift the debt burden from one part of the State Government to another. Any “saving” in interest payments for General Government will be offset by the reduction in dividend from the GOCs to the General Government account (dividends that were supposed to be used to reduce the deficit, and already looking in serious doubt before this announcement). The Treasurer’s argument that corporations such as these had “lazy balance sheets” and should therefore be more heavily geared only makes sense if the additional debt had been taken on to enhance future income generation and improved efficiency; this debt does no such thing as it was incurred, not in the interests of improvements to the GOCs, but in response to current deficits in previous General Government budgets.
It was a shame that Curtis Pitt declined to take any questions after his statement at the conference; there certainly would have been plenty of those present who would have had some serious questions to ask. In essence this is nothing more than a piece of accounting sleight of hand that does almost nothing to address the real issue of State Government debt levels. Treasury’s argument that this is perhaps a more efficient positioning of debt might hold some value, but it is certainly not of a significant level. We shall have to hope that the Treasurer has something more tangible to present in his first Budget tomorrow.