An illustration of how unprepared for Government the Labor Party is, was shown today by the sheer ignorance of Shadow Treasurer, Simon Crean, in relation to Commonwealth accounts.
The Commonwealth accounts do not include the proceeds of financial asset sales, such as Telstra, in the bottom line. They have not included the proceeds of financial asset sales in the bottom line since the defeat of the Labor Government in March 1996.
One of the first decisions made by the Government, and backed by the Charter of Budget Honesty, was to exclude these asset sales from the Budget bottom line.
If the proceeds of the privatisation of Telstra were, say, $60 billion, the Budget bottom line, instead of showing a starting point of $3.2 billion underlying cash surplus in 2001 (as shown in the Mid-year Review) would show a cash surplus of $63.2 billion. This is the way the Labor Party accounted. The Labor Party then spent the whole of the proceeds in each year of privatisation, still ran a deficit, and borrowed to fund the difference as well.
The Government uses the proceeds of asset sales to write-down debt. Consequently, in Table F3, page 169, of the Mid-year Review, the proceeds are factored into the reduction in the Commonwealth debt position.
The apparent belief of the Labor Party that the proceeds of an asset sale can be included in the Budget bottom line may indicate the way in which they are approaching their policy promises. So far, the Labor Party has claimed that they can rollback the GST, obtain additional revenue and guarantee it to the States, enter into increased spending promises, and produce bigger surpluses. This may indicate that they intend to treat asset sales as recurrent revenue and return to the pre-March 1996 practice.
Even worse is the possibility that Labor, after five years in Opposition has not yet understood how the Commonwealth accounts treat asset sales. If so, this may explain why they still fail to understand the dimension of how bad fiscal policy was during the five years leading up to 1996.