news Leading Opposition figures have slammed the Government’s handling of funding for the National Broadband Network in this week’s Federal Budget, alleging that the project’s finances are being misallocated to cover up holes that would have sabotaged the policy aim of delivering a budget surplus. But the Government has fired back, accusing the Opposition of ‘manufacturing’ budget problems.
Most of the funding for the NBN does not appear in the budget, as, according to accounting standards, it is not an expense as generally understood, but is actually an investment expected to generate a modest return. This handling of the NBN’s finances has been backed by a report into the matter published last year by the Parliamentary Library of Australia.
However, Communications Minister Stephen Conroy’s department did disclose how much the government is funding NBN Co over the next few years, in its portfolio budget statements. In the 2012/2013 financial year, the Government will allocate $4.7 billion to the project, and more each succeeding year — peaking at $5.6 billion in 2014/2015, and then setting again to $5.1 billion in 2015/2016. In addition, in this year’s budget additional funding was also allocated for NBN-related activities such as a $20 million investment in public education and awareness.
However, this treatment of the NBN in the budget didn’t find favour with Opposition figures such as Shadow Treasurer Joe Hockey and Shadow Communications Minister Malcolm Turnbull, who have publicly slammed the Government’s financial handling of the matter over the past day or so.
“In headline cash terms, the Gillard government will spend $8.7 billion more than it earns in 2012-13 because the government continues to spend on projects such as the NBN which have been taken “off Budget”,” said Hockey in a statement. “If the government was honest, and included NBN expenditure, the Budget would show deficits over the next three years. To put it simply, there would be no surplus if the NBN was on the books.”
In a statement responding to Coalition criticism of the Government on this issue, Conroy said the claim that the NBN funding should be expensed was “completely wrong”. “The NBN is an investment in an asset from which the Government will receive a return. It is classified by International Accounting Standards as an equity investment rather than a budget expense. This is consistent with long-standing budget treatment applied by this and previous Australian Governments.”
In a separate, lengthy statement on the matter, Turnbull raised a number of other matters with respect to the NBN’s budgeting.
“The National Broadband Network is at the centre of Labor’s 2012-13 Budget cooked books,” he said. “The Government’s claim of a meagre $1.5 billion surplus rests on shifting expenses forward from 2012-13 to the current 2011-12 financial year. Almost a third of the surplus comes from Senator Stephen Conroy’s creative accounting with the NBN.”
Turnbull said that according to the previous year’s portfolio statement for Conroy’s department, the department was scheduled to spend some $57 million on broadband in the past year. However, in the new budget this week, the MP said, that figure had “exploded to $484 million”, because the Government had included in that amount the first part of the payment to Telstra over its $13 billion arrangement with NBN Co.
Turnbull also pointed out that in last year’s budget, the Government had planned to invest $14.1 billion over the three years between July 2011 and June 2014, but in the latest budget that figure had grown to an estimated $14.5 billion. “Yet the network only has 5000 or so customers currently using its fibre network, compared to the 137,000 projected by June 2012 in NBN Co’s Corporate Plan,” said Turnbull. “So taxpayers are paying far more for a rollout that has delivered a fraction of the promised connections.”
The MP said the “large increase in the equity” required by what he described as the “reckless” NBN project, added to what he said were “repeated refusals” by the Government to reveal how many households and businesses would be able to connect to the NBN at the time of the next election, pointed to a “blow-out” in its expense and schedule.
“Little wonder Labor has attempted to frustrate scrutiny of the NBN by Parliament and the Australian public at every turn,” Turnbull said. “It is imperative Senator Conroy immediately releases a revision of NBN Co’s December 2010 corporate plan – fiscal honesty and policy transparency require it.”
The Liberal MP also took aim at the Government for other areas in the budget with relation to the NBN; such as the $20 million in education and public awareness funding, as well as another $20 million allocated towards a national online educational portal in the area.
“Given NBN Co has already wasted so much money by hiring a vast public relations team and granting numerous contracts to PR and marketing consultants and other privileged insiders such as Labor’s preferred opinion polling firm UMR, Australians have every right to ask whether these funds will simply result in more pro-NBN propaganda,” Turnbull said.
However, in his own statement, Conroy said Turnbull had “manufactured claims of a ‘blowout’ and a ‘fiddle’ in the budget treatment of the NBN”. “Mr Turnbull is either lazy, financially illiterate, or both,” he added.
“As a former merchant banker, Mr Turnbull presumably knows that you pay your bills when they fall due. The $450 million additional Departmental expenditure in 2011-12 is the payments made to Telstra under the terms of the Definitive Agreements. These agreements came into force on 7 March 2012. The treatment of these amounts within the budget was outlined in a press release distributed on the same day. There is nothing new about these payments nor can they be described as having been ‘brought forward’.”
“Similarly the claim of a $400M blowout in equity is false. Mr Turnbull’s assertion that there has been an increase in equity of $400M simply reflects that equity funding of $350M was deferred from 2011-12 to 2012-13. This was detailed in the 2011-12 Departmental Portfolio Additional Estimate Statement on page 39.”
opinion/analysis
Much of what Turnbull and Hockey are talking about here is old ground. The accounting of the NBN as an investment rather than an expense has been talked about a thousand times before, and while the Coalition disagrees, there doesn’t appear to be much evidence that the NBN should be included as an expense on the Government’s books, when it is slated to make a return in the long-run. The Government is pouring capital into the NBN, it is true, but that money is not disappearing into the ether; it will make a return and come back in the form of revenue and profits.
This scenario, as many people have noted repeatedly, is virtually guaranteed by the fact that both Telstra and Optus have committed to move their fixed-line broadband customers onto the NBN in the long run. Most Australians will use the NBN for telecommunications eventually; most will have no other choice in fixed-line telecommunications.
However Turnbull does have some good points here. The shifting of funding around in DBCDE is quite interesting, and it is also interesting to see the Government’s funding commitment changing a little. Most haven’t noticed this in the budget, and it’s a legitimate point which the Government should be questioned about. To be honest, I’m not sure who is really “right” here — Conroy or Turnbull — but it’s good that Turnbull has raised these movements of capital around. It’s always good to have this stuff on the record.
I don’t personally have a problem with NBN Co spending money on ads for for public awareness (and before you ask, no, they’re not spending with Delimiter — I don’t think we’re the audience they’re trying to reach). This is a hugely important government infrastructure project which will affect all Australians, and $20 million in the context of the billions being spent on the project is a legitimate marketing and education expense.
As for the “vast public relations team” which NBN supposedly employs … I can assure Turnbull that that team is actually quite small, over-worked and full of ethical individuals, several of whom I knew previously in other positions. I deal with them every week, usually several times a week. They are doing a tough job day in day out, and I don’t think he should be attacking them for it.
Image credit: Office of Malcolm Turnbull, Wikipedia user DAEaton (Creative Commons)
A couple of things leave me sour regarding the Coalitions continued attack down these lines.
Firstly, no government of any stature accounts for investing as a cost. Its spending thats a cost, and the difference between the two is vast. As you say Renai, its been discussed a thousand times before, and the only benefit I can see for Turnbull repeating the line is the hope that if its repeated enough, the neutral people will start to believe it.
We’re talking about one of the biggest infrastructure projects ever undertaken, and they are trying to reduce it to a petty squabble about how the numbers are shown. Their alternative is all talk and no substance when it comes to costs, so their claims of “funny money”. “trickery”, and “cooked books” all smells a bit whiffy when you ask them the same questions.
The second thing that worries me, and this is not tech specific, is that these attacks are showing more and more that the Coalition is about negativity, and tearing down the standing Government no matter the cost. There is a MASSIVE psychological benefit to the budget being in surplus, and a benefit that will help Australia as a whole for a long time.
Yet rather than see Australia make such a big step forward globally, Abbot and co are more interested in their own petty gains 18 months from now. Frankly, it disgusts me. Further to that, they would be using exactly the same accounting methods if they were in Labors position. Its how things work.
The whole approach by the Coalition has been to turn a standard business practice (account for investment separately) into a political issue, and somehow make that standard practice dirty simply because its being done at a Government level.
May I also add..
That is was also the Coalition who has been dogging the current government into producing a surplus within the next few years because of the “financial mismanagement” of earlier policies and moves resulting in the loss of surplus to a deficit…
Conveniently ignoring of course the several factors that would have impacted economy such as say… QLD floods and the GFC? And now that Labor is apparently delivering a surplus within the deadlines the Coalition stated, they’re now up in arms about every lil insignificant facet of a cost cutting budget. Rather convenient for the Coalition to abuse their opposition status of being able to question anything and everything while not being expected to come up w/ their own policies
Damned if you do and damned if you don’t as they say…
Oh dont get me started on the impacted economy. Its very simple – Labor is working with $100m a year less than when Howard was in power, thanks to the GFC and its impacts. To have that much less, be building infrastructure, AND somehow get into surplus shows why Swan was voted worlds best treasurer. Yet Aboot and friends still call foul.
But this is a tech site, not an accounting site…
I have no problem with the public awareness campaign money either. Unfortunately this is needed since we live in a country full people that are too stupid and/or lazy to educate themselves on this subject. Of course the big problem NBNco has is that they can’t make these adverts too political but personally I don’t think they are being aggressive enough considering all the rubbish and ill-informed perceptions about the NBN that are out there.
The Australian public aren’t stupid or lazy. I’m not sure why it is most often NBN supporters who describe the average Australian voter this way. After all, the government won a mandate to build the NBN in 2010.
“The Australian public aren’t stupid or lazy”
Australians will believe anything. Websites like The Australian and Andrew Bolt’s blog prove this. We now rival America as the most retarded country on the planet.
“I’m not sure why it is most often NBN supporters who describe the average Australian voter this way.”
Sorry but I was saying this long before the NBN had been announced.
“After all, the government won a mandate to build the NBN in 2010.”
And yet it could be cancelled by a “mandate” in 2013 in which case Australians are REALLY smart, am I right? yay go team!
After serving in the Australian Army; honestly – Australians arent in it for the ‘mateship’ anymore than they’re in it for the money.
If the general Australian public actually wanted to help their ‘mates’ out and ensure a good quality of life is maintained, why is it so hard for either side of politics to pass any infrastructure projects on large scale?
If aussies arent complaining about how something thats for the countries greater good is “a giant waste of money” or “we’re going to go broke”. If its neither of these, its that they’re complaining about “how all the boat people are invading” or “saving the trees” is a dumb idea. Its this sort of illogical bullshit that divides this country, it seems like noone works together.
“Australians have every right to ask whether these funds will simply result in more pro-NBN propaganda,” Turnbull said.”.
So advertising allocated to educate people on the factual benefits of the NBN is “propaganda”, but the Coalition’s relentless (and often blatantly misleading) attack campaign on the NBN is not. Right..
Extreme right ;-)
At lunch a few days ago my retired mother said to me the NBN would be a white elephant and that no one would be able to afford to connect to it.
It’s untrue of course and I corrected her but the information she’s reproducing I expect would be commonly believed amongst her demographic. It shows that if the coalition says something often enough whether it’s true or not becomes irrelevant.
This is what I hate about the media in 2012. It doesn’t matter whether something is true or not. A journalist somewhere will publish it anyway.
Agreed Renai.
It also demonstrates the main point of propaganda – that once an idea has taken hold it’s difficult to extinquish. $20 million in public awareness advertising is a drop in the ocean compared to the amount you’d actually need to spend to correct all the misinformation and FUD which has been spread, seemingly intentionally, around this one project.
Thats part of what I was saying in my comment at the top – the coalition seems to be throwing the same comments out over and over, despite proof to the contrary, seemingly hoping that because its repeated so often people will believe it.
I correct people as well whenever they spout this nonsense, and have had some great debates with people over the pro’s and con’s. Without fail though, once you clear up the FUD they are operating under, they understand the benefits.
All I do is point out how relatively slow internet was 10 years ago, and ask what will our needs be in 10 years, or 15, or 20. I ask how the roads are, and where we would be if various roads hadnt been built in the past. I talk about the technical limitations of the copper network, and how it will still need to be replaced no matter what plan the Coalition comes up with. Those simple 3 points, when discussed and made clear, will sort out most neutral observers.
Anyone with a bias one way or the other is a different debate. Normally I ask how their mobile connection is, and what its like when they are in various places – consistent, variable, non-existent in specific spots – and point out that if the bulk of people were sharing the same connection, it certainly wouldnt get better.
Overall, its disappointing to how many people hear only negative stories, and while there are positive stories out there, dont know how to access them.
I correct people as well whenever they spout this nonsense, and have had some great debates with people over the pro’s and con’s. Without fail though, once you clear up the FUD they are operating under, they understand the benefits.
Unlike so many other political opinions, I’ve found this to be the case with misinformed people I’ve spoken to about the NBN as well. Not because I possess great powers of persuasion, but simply because once its outlined in a straightforward factual way (and they understand the multitude of benefits they hadn’t heard of or considered) its hard to see it is as anything but a great thing for Australia’s future.
Out of all the things the Australian public should get behind its the NBN. If for no other reason than it will benefit every single one of us; directly and indirectly. Its sad that the Coalition and right wing media have painted it in such a grossly negative and misleading way.
Best photo of the 3 stooges I think Ive ever seen.
It came from Turnbull’s Flickr account :)
I didnt think there were photos of the 3 Stooges in colour, guess I was wrong :P
+1
In glorious technicolor and widescreen cinemascope – what more could we ask?
Apart from getting certain people to learn something about comms technology and the national interest before they mouth off about it, that is.
Isn’t it ironic that the liberals are now complaining of the $20 million that will be spent on the NBN ads, yet back in 2000 their leader John Howard spent over 400 million (!!!) on ads promoting the GST and in 2007 $121million on promoting Work Choice????
Hello??????? Perhaps someone should send them a postcard to remind them….
Why on earth isn’t the media reminding them of this?
Because it serves the media’s (and the media’s owners’) interests to not remind them (and the Australian public) of this.
Whether that’s because they think it just wont sell enough papers / generate enough ratings, or whether they have an objective of bringing down the current government, I don’t know. But they’re doing their level best to ensure that every silly, unsubstantiated claim from the opposition gets aired unquestioned, while making sure every statement by the government gets followed by as much space for a ‘rebuttal’ (often fact-free) by the opposition.
If they are going to book the NBN to the balance sheet as an investment, then it might be well time to do a partial write-down of the asset.
In 2010 they said they would do 127K premises by June this year. How many are connected? 2315 according to this: http://www.zdnet.com.au/time-to-come-clean-on-nbn-costs-339337610.htm?feed=rss
Any idea on how this affects the stated ROI figures? Nope, neither do I – but it won’t be good.
Did they roll out 22500 premises this week? No. Oh – how’s that 3.5mil deadline looking for 2015?
Hard questions about the NBN, Renai – you should try asking some.
David.
Interesting David that you would question the roll out. What credentials do you have to do so????
Well whether you do or not, here’s someone who has credentials…
http://www.canberratimes.com.au/act-news/aust-can-afford-nbn-risks-industry-expert-says-20120224-1ttnj.html
And look what he says. “Mr Malone said there was a lot of misinformation about the take up of the NBN suggesting it was behind its target. In fact it was ”running bang on target”…
Gee “running band on target”… what were you saying about write downs?
Alex: They have connected 1.8% of the premises stated in their own 2010 corporate plan.
I am well qualified in the use of calc.exe.
Ok, well obviously MM is wrong or a liar and we should believe you not him :/
And anyway David, just what has your INCORRECT little diversion got to do with the topic?
The topic being of course, the Coalitions disgraceful lies in relation to NBN funding…hmmm!
all politicians lie. its not just liberals though this site seems to like bashing them. you labor supporters should be asking where craig thompsons ‘donations’ are in the budget.
for all those people who bag the ‘opposition’ for disagreeing with the current powers, its what the opposition are there for. both sides are are stupid, ignorant, liars who do not have mine or your best interests at heart.
“you labor supporters”
You assume that because people here support the NBN that they support labor? I can really only speak for myself but I think you’ll find that like me most here are simply in favour of the NBN not labor. As for the “liberal bashing” it is justified and quite frankly they deserve it. THEY are the ones bashing a good broadband policy because they are unable to come up with a decent one of their own, so people should rightly be questioning their motives and their relentless idiocy regarding it and that is exactly what you are seeing here. Hope that helps.
“its what the opposition are there for. ”
And we the people (the voters) are here to disagree with anything and everything EITHER or BOTH side say when they are wrong. What, do you think the opposition shouldn’t be questioned just becasue they are not in power? They want power right, so they should be be able to answer the easy questions before AND after the fact.
Indeed “you Labor supporters”…
Hypocrite, who admits that’s he’s NOT a Labor supporter (i.e. a Coalition supporter) giving us shit simply because we want the NBN for all Aussies?
Neither side are Social Capitalists, except for Kevin Rudd and 3 other members, so given that stance – I cant stand either party.
I for one am not a Labor supporter. Neither am I a Coalition supporter. Though I have probably voted Liberal more times than Labor. I vote based on the merits of the policies of the parties at the time. Some times I vote an independant and put Liberal and Labor last because they don’t present a decent policy, just a smear campaign. I would say next time I will vote Labor because the think that Australian communications future is very important. Too important to play politics with as the Liberals are doing. That and not having any policies other than a policy of smear. Then there is a Tony Abbott factor, excuse the French, but, what a wanker.
“for all those people who bag the ‘opposition’ for disagreeing with the current powers, its what the opposition are there for.”
This is wrong and the fact that anyone thinks this is what is wrong with politics in this nation. The job of ALL politician is to do what is best for their constituencies and for the country as a whole. The opposition have failed to do this spectacularly, we have a minority government so if any opposition had a chance to improve policy it was this one and they have failed. Instead of improving policy they are saying no and letting the independents and greens do the their job of improving policy. If the LNP supports truely want what is right for the country they should tell their representative to take their heads out of their out of their collective arse.
BTW voted CLP for 3 of Howard terms and voted independent in kevin07 I only voted Labor last election because i felt the NBN was important infrastructure for the nation and when it came done to it with the exception of work choice it was the only real difference between the LNP and Labor.
I have been thinking for a while. Some one of such a high political figure (Abbott/Turnbul) would have to have some form of accountability to those things he states. Is it possible to sue someone like that who could been seen to be knowingly misleading the general public and using his political status to do so for his own political gain?
I would definitely like to know if Turnbull was able to face consequences for his actions, but I will give him credit, Abbott has a lot more to answer for, his misleading comments are a lot less nuanced and intelligently delivered.
Im also annoyed that 20 Million to counter anti-NBN propaganda is even necessary, seriously, the Liberals claim to be fiscally responsible, yet they are heavily to blame for the need to even spend that money in the first place! I wonder how much money has been wasted dealing with the manipulations ongoing under Abbotts campaign of hostilties!
As to “Guest”, mate people with sense can see in one sentence that you are far more likely to be politically motivated than those you fire a very cheap shot at. The readership of Delimiter doesnt seem to me to sing Labors praises, but certainly respects what is presently easily the best broadband policy and a fantastic long term benefit to australians as a whole. As many have said, if the Liberals got onboard and did something remotely sane, they would romp it in. Most people just cant understand why this isnt more obvious to them!
Personally Abbott has seriously tarnished the liberal brand for me, and a number of previously liberal leaning people I know. The last election was the result it was because across the board people are unsatisfied with both the majors. I live for the day the backlash against all the mistruths come back to bite. I know I treat the mainstream press with a serious distrust now and for the first time am actually considering paying for alternative media such as from the likes of Crikey and Delimiter. I really hope that what we are seeing is the end of some of the major outlets, and a movement to a better media environment.
If I recall, Renai was arguably anti-liberal in the earlier days of the NBN, but seemed to me to have adjusted as his analysis progressed. Forgive me if I am mistaken Renai, whatever the case Im pleased that there are people prepared to ignore the political bias and seek the truths.
Did you mean anti-NBN? I am pretty sure he was. He was keener on seeing the Liberal policy of letting the telcos do the infrastructure and compete at a wholesale level. Correct me if I am wrong Renai, but I believe the lack of convincing alternatives and the NBN looking like it had a good solution and the majority of the arguments against it being nothing to BS FUD reshaped his opinion.
Self-made billionaire businessman (Gold Coast property, then mining) backs Malcolm on NBN accounting:
http://www.brisbanetimes.com.au/queensland/palmer-would-write-off-australia-20120510-1ye8d.html
Scoff all you like, just look at Labor’s primary vote — we know who the electorate (rightly) believes.
Um … Palmer is a loony ;) And you’re wrong, the electorate believes Labor on the NBN:
http://delimiter.com.au/2012/02/21/nbn-enjoys-prolonged-popular-support/
How many “loonies” do you know have the business smarts to make their first fortune and “retire” at the grand old age of 29?
How many “loonies” have the business acumen to go on to make a second bigger fortune in a completely unrelated field (just to prove the first bucketload wasn’t a fluke)?
How many “loonies” have bankers lining up to invest hundreds of millions in their private projects?
. . . .
Thought so.
Mate this has nothing to do with the NBN. Stay on topic.
I’ve had a few readers complain about your comments this week. I hope you can keep it civil.
http://delimiter.com.au/comments-policy/
Renai, you’re the one who brought up the off-topic of someone being a looney – his post prior to your reply was on topic. Don’t be the kettle calling the pot black.
So, to keep the accounting off the books as an asset they would in essence have to make every single dollar they spend or more back. If they make back even one cent less than they spend then it is a loss.
Does anyone know how they propose to achieve this? And over time frame?
How was 1%’s comment on topic?
Self made billionaire Clive Palmer (I’ll fill in the balnks) – Liberal Party member and possible Liberal Party candidate for the seat of Liiley iirc – agrees with the Liberal party?
WTF has Clive Palmer got to do with this?
Bit like saying self made rock star Peter Garret agrees with Labor policy.
What a revelation.
Ok let’s compromise and say, maybe it wasn’t completely off topic and agree it was just plain dumb, ok?
It was on topic because the article speaks about the accounting practices of the government and Turnbull’s interpretation of them. One Percent pointed out that some very influential business men agree with Turnbull on his interpretation of the governments accounting practices. Hence his original post was clearly on topic.
But the business man he mentioned is a Liberal/National Party member, aiming to becoming a MOP or Minister in a Coalition government.
Seriously, do you think he could have chosen anyone more biased?
I didn’t know that – so if that’s the case then it is biased – but still on topic ;)
Does anyone know how the Coalition treated this sort of investment when the were in government?
There must be some sort of record.
Personally I’ve never seen the point of picking on points like this. Isn’t their time better spent keeping on top of all the shadow portfolios and being ready to show a good policy when the next election comes along. Why waste time in a pissing match over the NBN? (rhetorically speaking).
I voted for Howard years ago, so without trying to sound like a Labor supporter (NBN supporter YES), I seriously don’t remember him building anything of significance as a comparison to the NBN? Before that I dunno.
I do remember Howard having a republic referendum and skewing the question to divide republicans (brilliant, but somewhat unethical politics, iirc) as otherwise we’d now be a republic.
And of course, introducing a GST, selling Telstra and selling $b’s of our gold reserves. Then claiming to be a financial wizard because he had a shitload of $’s and everyone (well many) believed him and still do :/
Anyway, what I think is of more significance, where will the coalition’s $17B for their broadband plan (according to Citi Group) of gifter subsidies, with no ROI and no asset ownership, come from?
BTW Frank as for you parting question (which is almost as dated as the oppositions FTTN broadband plan) all of this is contained within the corporate plan released some 18 months ago iirc…(and soon to be updated due to the Telstra deal)
You remember that document all the NBN critics used to demand and say the NBN is a farce without and when it was supplied and shot them down, they said, it’s shit… just all assumptions (der).
I don’t know how my question is dated.
I don’t know of the references you state.
I do know you didn’t answer my question.
It was a genuine question, if someone could supply me with a genuine answer that would be great.
My apologies Frank I thought you were trolling, my bad…!
http://www.nbnco.com.au/about-us/corporate-plan.html
There are pdf downloads here to the NBN Corporate Plan (soon to be updated due to the Telstra deal, I believe) which outlines NBNCo’s projections in relation to the questions you asked.
Cheers
Here’s the business case summary too Frank
http://www.cnet.com.au/story_media/339307519/NBN%20Co%20%20Business%20Case%20Summary.pdf
Apology accepted.
Thanks for those links I’ll look through them.
Yes, it would be a loss. But, and this is an important point, for the purposes of accounting, a loss is not the same thing as an expense.
Furthermore, that loss would only represent the cost of the network minus the eventual income; not the cost as a whole. Thus, it’s a loss which may still justify the project as a whole; governments don’t need to make money on all their investments, after all. Often, breaking even, but providing an essential social utility, is more than enough.
OK, fair enough. Do they include future productivity gains in their profit assumptions?
I’ll credit Clive has wealth but he’s also full of BS and his actual financial assets reflect that.
From what I’ve read he’s also short on investors lining up to give him hundreds of millions. He seems more smoke and mirrors than actual business genius.
http://www.businessspectator.com.au/bs.nsf/Article/clive-palmer-coal-mining-hew-hope-aston-mineralogy-pd20120430-TU6JU?OpenDocument&src=srch
1% you need to read this http://www.businessspectator.com.au/bs.nsf/Article/clive-palmer-coal-mining-hew-hope-aston-mineralogy-pd20120430-TU6JU?OpenDocument&src=srch
You say this “How many “loonies” have bankers lining up to invest hundreds of millions in their private projects?”
Business Spectator says this “At first glance the way Palmer positioned and marketed the China First vehicle made it attractive to Chinese businesses searching for profitable foreign assets. This created the initial interest. However once investors dug a little deeper, they found there wasn’t a viable business model underlying the float. Understandably they left in droves. As a result the China First project is now a stranded asset.
You say this “How many “loonies” have the business acumen to go on to make a second bigger fortune in a completely unrelated field (just to prove the first bucketload wasn’t a fluke)?”
Business Spectator says this ” So Palmer has one income-earning asset and a whole bunch of tenements offering nothing but promises of future wealth.”
and this “Finally, what ultimately killed interest in the float was that there was considerable doubt about the management team; put simply, there isn’t one. For an investment of this magnitude they would want an experienced miner at the helm.”
and this “So is Palmer a mining magnate or an asset investor? Either way, his wealth is trapped in stranded assets with little prospect of being rescued by sympathetic investors.”
And his company Mineralogy and its subsidiaries reported net losses of $58.5 million in 2008-09, $29 million in 2009-10 and $11.4 million in 2010-11. It received a tax benefit of $874,599 in 2010-11, against revenues of $5.6 million, and paid $136,799 in tax the year before.
So basically he has a heap of dirt that’s worth nothing if he can’t attract billions of dollars from Chinese investors to get the product to market.
Thought so.
Clive Palmer is a member of the Liberal/National Party in Qld and is supposedly going to run against Treasurer Wayne Swan for the Coalition in the upcoming election, if he wins preselection…
Previously you stated information gathered from malcolmturnbull.com.au as your unbiased proof.
Seriously dude… WTF do you think people like those you gather your only info from, are going to say?
I don’t see why the Liberals aren’t sued for defamation over this. They have known at least since last year that the government’s current handling of the accounting is the correct way, yet they continue to announce to all that it is incorrect, and accuse the government of being dishonest and all sorts.
Needs to be some accountability for members of parliament to state facts.
Perhaps if they knowingly lie (say.. By stating over and over after the matter is adjudicated by the people that decide these things that an investment should be on the books) they lose their vote in parliament for a week…
Would keep both sides a slight bit more honest.
Unfortunately what Turnbull has said is that if the contributions to the NBN are added to the Budget bottom line it will turn a surplus into a deficit. This is mathematically correct and for the accounting wizards it is generally referred to as cash flow.
Turnbull hasn’t really lied he has just gilded the lily to try and score cheap political points. Seems to be common practice by all sides of politics these days unfortunately.
But as the Parliamentary Library said, the way they are costing is correct! So…
Problem being, the opposition are and always will, have an each way bet. They complain about the NBN being and asset, not on budget, but if it were on budget they would be saying, this proves the NBN is a liability rather than an asset?
They also cry about the taxpayer, but then whinge about the NBN being costed outside the budget and funded via other avenues (i.e. not income tax dollars).
And the list goes on…
and no the others aren’t squeaky clean either/at all, before me (an NBN supporter) is referred to as a Labor shill.
Alex I agree with the Parliamentary Library entirely. What they are saying is standard and internationally accepted accounting practice.
What Turnbull is talking about is really a cash flow document which as far as I am aware is not produced by Parliament to go with the budget. As far as I am aware all companies include a cash flow statement in their annual accounts so as to show all the money spent, including capital investment, and where it all came from. I think that Parliament should be required to do the same if they are going to use accrual accounting for their reporting.
If you read carefully what Turnbull has said he hasn’t in fact lied he has just managed to bamboozle the media with a an additional bit of irrelevant information. Something both the main political parties are adept at. in my opinion.
I think that the Coalition is dead wrong in their opposition to the NBN and also their incessant opposition to just about everything proposed by the Government. However I also think we need to look carefully at what they say and be prepared to acknowledge when they are right. If we don’t then I would suggest we are just as bad as they are in nay saying everything the Government proposes.
1. The Parliament doesn’t produce budget documents, government departments do
2. The documents all include cash flow statements.
There are thousands of documents that go into a budget. They explain what is being done in each portfolio and government programme. They show what new policies are being presented in the budget. They show where funding is ending. They also contain full projections of financial statements – income statement, balance sheet and cash flow. I encourage you to look them up.
Please note that “the budget” only accounts for about 1/3 of Commonwealth spending. The rest is in accordance with “special appropriations” for things like pensions, Medicare, social security. That’s because an Act has passed both houses of Parliament approving the spending on these items in perpetuity – because the need doesn’t change each year. Regardless, these special appropriations are still included in the forecasts that are published with the budget.
(I should note that it’s several years since I’ve been involved in the budget process, and so some of my explanations may be a little out-dated or vague).
Let’s see… who introduced full accrual accounting, and application of accepted accounting principles, to the APS? That would be John Howard.
The current government is budgeting in accordance with those accepted accounting principles, and all of a sudden the coalition doesn’t like it? Come off it guys, we know you’re nothing but nay-sayers, but at least try to be believable.
I’m just worried that the coalition will get into government and do the same kind of bargain-basement sale of the NBN as they did with Australia’s other big communications infrastructure asset of the 90s – Telstra. Sell it at mate’s rates, to prop up today’s policies and ruin competition policy AGAIN.
Economists have stated the NBN is an investment, not a cost. Further, it would be incorrect to list it in the budget as a cost.
http://www.aph.gov.au/library/pubs/BN/eco/NBNBudgetStatements.pdf
Even Mr Turnbull has slipped and called it “a massive investment</em":
“By any measure the NBN is a massive investment. The Government says the direct capital cost of the network will be $37 billion and the peak funding required by NBN Co $41 billion.”
http://www.malcolmturnbull.com.au/blogs/nbn-pricing-revisited/
“Unfortunately what Turnbull has said is that if the contributions to the NBN are added to the Budget bottom line it will turn a surplus into a deficit.”
Except that would be (as I understand it) an incorrect accounting practice.
Turnbull has claimed several things around the NBN, it’s been both an investment, and an expense, at varying times to suit the argument. I’m reminded that, again, local Liberal and National party members are demanding further NBN action.
Aren’t you guys capable of intellectual nuance?
It means you capitalise costs which are recoverable and expense the rest.
Business 101. Hardly controversial.
Let me know when you’ve studied business 101. Your “explanation” is incorrect and naive.
Again, check the accounting standards for definitions of assets, liabilities, expenses, revenue and equity.
Company A is covered by 5 brokerage houses. 2 analysts paint glowing prospects and issue BUY recommendations, and the remaining 3 issue SELL recommendations with much lower target prices because they believe company A will struggle to recover certain costs incurred from a project and asset writedowns are inevitable.
This kind of situation happens all the time in the real world. Does that mean the bearish calls on company A constitute “lies” and “defamation”?
Of course, not — it’s called a “marketplace”, and in a marketplace, different people have different opinions. In the real world, investors don’t get sued for forming independent contrarian opinions on public corporate entities — they get invited to write op-eds for the Wall Street Journal.
l know some of you might find that a shocking concept, but it’s entirely reasonable for members of the Opposition to hold a different view on the financial prospects of a fictional network that is largely “on paper” and that has barely been built.
Cue one-eyed, NBN-cheerleading howl and rage.. . . .
No need for cheerleading, just some simple facts. Your suggested analogy is totally wrong. The NBN is being accounted for in accordance with international accounting standards. There may be different opinions on those standards around the edges, but there is no difference of opinion here – it’s an investment in an asset.
Your analogy fails, as it isn’t based on any “standard”. The opposition won’t mention accounting standards at all, because they know that the NBN is being paid for and booked in accordance with them. It’s an asset. Parts of it are works in progress. Accounting has some things that are black and white, and this is one of them.
Try reading the standards sometime – http://www.aasb.gov.au.
You are wrong.
AASB, in keeping with internationally-accepted accounting standards, promulgate “fair value accounting”, and not historic cost.
What we have is a fundamental disagreement about the fair value of assets booked on NBNco’s balance sheet.
That report by that parliamentary librarian clearly states that fair value adjustments to the Government’s stake in NBNCo will impact the Budget bottomline.
Go read it.
hey One Percent Poster,
can you cite a reference for your claim that the Parliamentary Library of Australia is wrong on this count? Unless you can, I will not tolerate further debate on this issue. There is a clear judgement on this issue by the Library. Unless you can back up your assertions that they’re wrong with evidence, you are on shaky ground.
Just stating that “you are wrong” does not cut it in Delimiter discussions. We need evidence; this is a conversation based on facts, not conjecture.
Cheers,
Renai
@1%
Try… you are wrong because Malcolm and Clive (obviously the even funnier version of Derek & Clive) said…!
Well, that’s been your argument thus far…!
No one has ever claimed that the librarian’s memo is wrong on any count.
As a general rule, costs should be capitalised — but only to the extent that they are recoverable from future revenues.
The librarian’s memo recognises this — that’s why in a later section, it mentions the budgetary impact of fair value adjustments to the Government’s equity stake in NBNco. These “adjustments” occur because the capitalised costs are no longer deemed recoverable.
Now, you can take Labor’s approach of insisting today that 100% of the costs of building the NBN are recoverable; in which case, when reality finally sets in, some portion of the capitalised costs will have to be written down in one big hit.
Or, you can take off those rose-coloured glasses and adopt the prudent, conservative view that not all the costs are recoverable; and, accordingly, part-capitalise and part-expense the project expenditures as they arise.
It’s perfectly logical that two differing views of the financial prospects of a project will result in differing accounting policies or treatments. The same underlying accounting principles (which the memo does a good job of documenting) can produce different results depending on your adopted policies and assumptions.
When BHP builds a new mine, all the analysts at the various broking houses will fire up Excel and produce their own cost models and financial projections for the new mine. These models will oftentimes spit out different valuations and figures for the very same mine. These analysts may even dispute management guidance — does that mean they are “telling lies” or guilty of “defamation”?
Of course, not.
The NBN is a piece of infrastructure that largely exists on paper — the vast majority of the costs have yet to be incurred, and revenue streams have yet to materialise. Anyone who claims to possess “factual knowledge” about the future financial outcomes of this project, and seeks to block alternative views on the issue is delusional.
And herein lies the point I believe Renai is making here at Delimiter, 1%.
You say NBN will not be profitable (white elephant, so to speak).
People such as me say it will.
What EVIDENCE do you have to back your claims… hmmm none, other than those from the NBN’s political opponents .
What evidence do we have… the Corporate Plan.
Are you right ? Are we/the Corporate plan right? No one knows…
But going by what we do know, according to the relevant documentation supplied to build the NBN, the NBN will be a profitable venture.
Do you see the difference?
We argue on a basis of strength/actuals, whereas you argue on a basis of political/economic FUD.
And seriously, when you consider other NBN critics keep whinging about NBN monopoly – which we are all being “forced onto”, well you guys certainly have all bases covered.
It’s the same argument he has been making for nearly a year, without any evidence. Turnbull couldn’t provide any evidence either. It’s all the same BS that got him kick off here before.
If you are going to make a claim that it will not recover costs give at least some evidence why it won’t. If it’s the same crap you have been posting over and ovwer, don’t bother 1%, it’s not evidence, it’s opinion.
All your arguments are centred around this argument that you have yet provided not a shred of evidence to support.
All of this is why the NBN’s business case provides a range of projected outlooks for income and ROI. It’s not set in stone. But neither is it the disaster which the Coalition has made it out to be.
The “range of projected outlooks” is just a simple (numerical) sensitivity analysis performed on a model which incorporates various unstated structural assumptions. By no means does it preclude alternative projections that fall far outside the “range” when different structural assumptions are employed.
A rocket builder may say, “my rocket will launch successfully and reach the moon”. In response, a third-party observer may claim, “based on my understanding of the engineering design and the properties of the build materials, the rocket will combust into flames within 60 secs of fuel ignition”.
Would the divulgence of the “range of projected trajectories of the rocket” by the rocket builder automatically invalidate the claims of the third-party observer? No — because the difference in predictions stems from a disagreement about variables or assumptions of a higher-order.
Depends if the third party is in “opposition” and has a n obvious vested interest in stating failure, simply because it suits his agenda, not because it is necessarily an actual!
Yes, assets must be recorded initially at purchase price (historical cost), and then, at reasonable intervals, at fair value. Are you suggesting that there is a huge difference between the NBN’s fair value and its acquisition price? Are you an accountant? Or a valuer?
In other words, there MAY be a difference between historical cost and fair value. It may mean posting an expense if the fair value is lower than the current written down value, but on the other hand it may mean an increase in the present fair value of the asset(s). You (and whatever sources you claim to have) are second-guessing a whole load of factors that go into valuing assets. It is unlikely that the value of the NBN would be written down to any significant extent in the near future, except if a future government decides to build a second NBN. And then sell them both.
So why are all these Coalition politicians who have a SELL on the NBN, the first to WANT AND DEMAND THE NBN for their electorates?
Cue typical dollar driven, far right reply with links to multi-millionaire Liberal politicians/would be politicians/billionaires (who really represent us all)…sigh
Sorry but to further clarify. When i say sue I don’t mean for financial gain. I mean so the record can be set forward and I’m not just talking about what is written in this article but more so all of the miss information and lies they have pushed regarding the NBN
From Tony Abbott’s budget reply speech.
Why spend $50 billion on a National Broadband Network so customers can subsequently spend almost three times their current monthly fee for speeds they might not need?
Perhaps my maths is bad but when I did the sums I’ll be getting a superior product and saving $40 a month.
Why dig up every street when fibre to the node could more swiftly and more affordably deliver 21st century broadband?
Is FTTN really 21st century broadband? I also doubt whether it can be done more swiftly or if it will be more affordable.
Why put so much into the NBN when the same investment could more than duplicate the Pacific Highway, Sydney’s M5 and the road between Hobart and Launceston; build Sydney’s M4 East, the Melbourne Metro, and Brisbane’s Cross City Rail; plus upgrade Perth Airport and still leave about $10 billion for faster broadband?
$10 billion for faster broadband? So he’s going to swap out Labors vision of FTTH and the Libs of FTTN with two cans and a piece of string?
Just proves how out of touch Abbott really is. He must be confused, I’m guessing he saw that “fibre to the node” had the word fibre in it and figured it was the same as “fibre to the premises”, I’m mean really there is no way you could confuse FTTN for 21st century broadband any other way.
Also interesting is how Abbott rounds up to the nearest 10 billion for the NBN while rounding down to the nearest 10 billion for their FTTN patchwork plan.
Are you paying attention Australia? This man is deceiving you and you’re OK with it.
Why didn’t Tony build any of this infrastructure he’s talking about during his ten years in government?
He was too busy f#cking over Australia with Work Choices. Meanwhile Communications minister Senator Alston was busy f#cking over Australia with a highly crippled “unique” DigitalTV system that we’re now stuck with for 20 years+
My stomach churns at the thought of the LNP taking control of ICT infrastructure in Australia. Even if they are genuine about FTTN (which I highly doubt) what percentage of homes will get it? And how much will it cost? When will it be finished by? Who will build it? What ISPs will be on-board? How will they handle the separation of Telstra? What about the deal made with Telstra and the government to transfer everyone over to fibre? None of these questions have been answered. They don’t even have anything vaguely resembling a proper broadband policy.
In short the scenario is an absolute nightmare, and no matter how much you might dislike Labor or our struggling PM, if you care about the future of communications in Australia, Labor are the only ones that are delivering what we need.
I can answer some of the questions.
“what percentage of homes will get it?”
My guesstimate less than 40%. Remember they said they would make use of the redundant HFC, so they’ll skip all those areas and then concentrate FttN in areas that are the least concerned with broadband speeds so they’ll get less complaints when the speeds they get end up being a third of what they claimed.
“And how much will it cost?”
The network? $17 billion plus another $43 billion to fix up the mess and upgrade to FttH once it’s done. That’s $60 billion so far then round up to the nearest 10 billion (we have to use Abbott logic here) that takes the total to $70 billion.
“And how much will it cost?”
For customers? You’ll be paying exactly what you are paying now and what you would be paying with the NBN but receiving a much inferior service.
“When will it be finished by?”
With a start date of 2016 plus maybe a 4 year build time that means 2020.
Thanks Hubert. For depressing the hell out of me that is! The scary thing is that sounds like exactly what the LNP would do.
So I’m now scared and depressed. I hope you’re proud of yourself! ;)
Gents,
Here’s what Cit said, when they were actually determining TLS shares in relation to NBN vs. Coalition policies, late last year.
http://dl.dropbox.com/u/17532784/NBN_CoalitionPolicy_Nov11.pdf
Interestingly they mention –
40% FTTN
25% HFC
7% wireless
and the killer…
“28% ADSL2”
So will they upgrade those without to ADSL2 or will those (28%) on it simply remain?
Hopefully the mindless critics who say what we have is good enough will receive their just deserts!
“Why dig up every street when fibre to the node could more swiftly and more affordably deliver 21st century broadband?”
Love this one as due to the use of Telstra Ducks more digging will be likely be done to install FTTN for Abbots solution putting in all those cabinets.
More tidbits which I’ve picked on from Abbott’s budget reply speech.
The forecast surplus relies on the continuation of record terms of trade even though growth in China is moderating and Europe is still in deep trouble.
If world economies go in to decline then it is rare that any budget will deliver a surplus unless you do something drastic to achieve that surplus ie devaluation of the dollar, huge budget cuts to public sectors like health, education, defense etc all of which have an eventual negative effect on society. All of these events have the hallmarks of a depression.
Yet on Treasury’s own estimates, a decline in the terms of trade of just four per cent would turn the surplus into a $1.9 billion deficit next year and $5.1 billion the year after.
Something that (unless you do any/all of the above) we have zero control over. A strawman argument.
As everyone who’s managed a household budget knows, shuffling costs from one year to another, as the Treasurer has, doesn’t make them go away; and a tiny surplus in one year doesn’t outweigh huge deficits in other years.
The Howard government held the patent on shuffling costs from one year to another. Another strawman. Tony must think we have short memories. I’ll add that he himself must also have a short memory given he was a member of the Howard government.
Even if the Treasurer is right, it will take 100 years of Swan surpluses to repay just four years of Swan deficits.
This is an epic strawman argument. How can someone say this and keep a straight face? I’d be laughed out of the building I work in if I ever said something like that…
Tony Abbott must be (and must think we’re all) naive and that the world economy has not differed from that of the Howard era. To think that people are being sucked in by his lies (no sugar coating here) just goes to show how short-sighted people really are.
+1 Mike
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