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  • News, Telecommunications - Written by on Thursday, September 6, 2012 16:23 - 50 Comments

    Backdown: Turnbull accepts NBN budget accounting

    news Malcolm Turnbull has acknowledged that the National Broadband Network’s funding is correctly accounted for the in Federal Government budget as a capital investment and not an expense, in a move which opens up a divide between the Shadow Communications Minister and other senior Liberal leaders such as Tony Abbott and Joe Hockey.

    Over the past several years, a number of senior Liberal figures, including Opposition Leader Abbott, Shadow Treasurer Joe Hockey, Finance Spokesperson Andrew Robb and Turnbull himself have repeatedly claimed that the tens of billions of dollars the Federal Government is investing in its NBN project should be classified as an expense under the Federal Budget. Several of these same figures have argued that because of this, the NBN’s funding could be more appropriate allocated to other types of public infrastructure such as roads, instead of spending it on an NBN project which the Coalition has largely seen as expensive and unnecessary.

    For example, in May 2011, Abbott said in his budget reply speech with respect to the NBN: “That $50 billion could fully fund the construction of the Brisbane rail loop, for instance, the duplication of the Pacific Highway, the Melbourne to Brisbane inland rail link, the extension of the M4 to Strathfield, and 20 major new teaching hospitals as well as the $6 billion that the Coalition has proposed to spend on better broadband.”

    That same year, Turnbull labelled the Federal Government’s continued approach of keeping the cost of building its flagship National Broadband Network project off the annual budget books a “charade”.

    In a speech to the Committee for the Economic Development of Australia’s State of the Nation Conference in June this year, Opposition Leader Abbott said that $5.8 billion of infrastructure spending related to the National Broadband Network in the next financial year “should be on budget”, stating that the Government’s “wafer-thin” budget surplus achieved in the past Federal Budget was based on this accounting treatment and similar “fiddles”. Shadow Treasurer Joe Hockey, in a separate speech in Parliament on the global economy, also directly mentioned the NBN’s accounting treatment in the Budget. Speaking about the current Labor Government, Hockey said: “They are promising a surplus that, looking at their form, they will never deliver. In the current year they said there would be a $22 billion deficit and now we have a $44 billion deficit.”

    “They are cooking the books in order to promise a surplus next year. The Greeks got themselves into a bit of trouble cooking the figures. We are not on anything like that scale, but the truth is that if you include the NBN expenditure and the Clean Energy Finance Corporation then we are running a deficit.”

    However, the Coalition is believed to have been factually incorrect in its claims that the NBN funding should be included on the Federal Budget as an expense. 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 (according to its corporate plan) a modest return of 7.1 percent on the Government’s investment, over the period through to 2030.

    According to a research note published last year by the Parliamentary Library of Australia, Labor is technically correct on this matter, and the Coalition is wrong. “Australia has adopted internationally accepted accounting standards, and these are applied in the budget treatment of the NBN,” the library’s Brian Dalzell, who works in its economics division, wrote in the report (available online here in PDF format).

    Communications Minister Stephen Conroy has consistently pointed out that the Coalition is incorrect on the matter.

    In a statement responding to Coalition criticism of the Government on this issue in May following the release of the Federal Budget, 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,” Conroy said at the time. “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.”

    And in August, Conroy savaged the Financial Review newspaper for its coverage of the issue, speaking in detail about what he said were a series of “misconceptions” regularly repeated in the media with respect to the NBN. “As recently as 28 June, Australia’s premier financial journal questioned the treatment of the NBN as an investment,” Conroy said, referring to the Financial Review.

    Today, in a small note published at the end of a lengthy response to a critique of the Coalition’s rival NBN policy by Business Spectator, Turnbull acknowledged the correctness of the NBN budget treatment.

    “As far as the balance sheet point is concerned, let us just cut through the fog of spin and nonsense here. A dollar saved on the NBN Co build is a dollar less for the Commonwealth to borrow and service with interest,” he said. “Under the accounting rules the expenditure on the NBN does not count towards the budget outcome – so much deficit or surplus – but it is cash – real money – nonetheless and it does add to the debt burden of Australians.”

    Turnbull’s comments represent the first time over the past several years he has publicly acknowledged the accuracy of the Government’s accounting treatment of the NBN funds.

    The Shadow Communications Minister’s comments also come as Turnbull has this week made a major speech discussing the need for what he referred to as “the urgent need for honesty” in Australian political discourse. “Most Australians believe we need an honest, informed policy debate. Yet I don’t see many people who believe we have that. Instead, we all hear again and again that Australians are ashamed of the parliament, that they see it as nothing more than a forum for abuse, catcalling and spin,” he said, delivering the annual George Winterton Lecture at the University of Western Australia.

    “In case you think my call for a change of attitude and practice to truth in politics is just idealism – let me make a practical political point. It seems to me that we don’t simply have a financial deficit, we have a deficit of trust. We can argue for hours which side and which politicians, which journalists indeed, have contributed most to it. But it affects all of us and all of our institutions.The politicians and parties that can demonstrate they can be trusted, that they will not insult the people with weasel words and spin, that they will not promise more than they can deliver, that they will not dishonestly misrepresent either their own or their opponents’ policies – those politicians and parties will, I submit to you, deserve and receive electoral success.”

    Regular readers of Delimiter will know that we have been fighting a long-term battle on this issue for several years now. It has been simply incredible that the Coalition has sought to have the NBN funding classified as an expense on the Federal Budget — this, and the claim that the NBN funding could be re-allocated to other projects, has always been demonstratably inaccurate, as the Parliamentary Library pointed out some 12 months ago.

    It is heartening to see Turnbull finally acknowledge this point in public. We can only hope that other senior Liberal politicians pay attention and take the same approach. The NBN funding is not an expense, it is an investment. It is immensely gratifying to see Turnbull acknowledge this objective fact, and I hope we can now lay this particular micro-debate to rest and move on to more fruitful and subjective ground.

    Image credit: Office of Malcolm Turnbull

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    1. Dominique M.
      Posted 06/09/2012 at 4:30 pm | Permalink |

      “The politicians and parties that can demonstrate they can be trusted, that they will not insult the people with weasel words and spin”

      Says Malcolm Turnbull on the same day that he “responded” to the Technology Spectator with this:

      “Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.”

      Has Malcolm Turnbull really changed his position on the NBN finances? I don’t think so.

      • Dominique M.
        Posted 06/09/2012 at 4:38 pm | Permalink |

        Just a small correction, “within a day”, not “on the same day”. And just in case anybody missed it:

        Weasel words: “Several very experienced civil contractors and engineers have said to us recently that they think”

        And spin: “the actual build cost is likely to be $80 to $100 billion for example.”

        So, Malcolm Turnbull has insulted “the people” with this and thus has demonstrated that he’s one of the politicians that can’t be trusted. This is literally just from taking two statements of his made less than 24 hours apart.

      • midspace
        Posted 07/09/2012 at 9:01 am | Permalink |

        What “civil contractors”? I’ve only heard this spin as opinion pieces from so called experts in communications who have never laid fibre in their life.

        • nonny-moose
          Posted 07/09/2012 at 3:21 pm | Permalink |

          i still have questions.

          the only kind of backup for the figure is the next paragraph which i reproduce here:

          “These more recent comments compare with Cliff Gibson’s estimate cited in Commsday 16 May 2011:

          “I do know that the two partner organisations that we work with would have put tens of millions of dollars worth of work in to put the bid together and our experience on this exercise, and the costing involved, would lead me to think that the cost of roll- ing out the optic fibre to 93% of the homes around Australia is going to cost between 60-80 billion,” [Mr Gibson] told an ATUG industry gathering in Melbourne.”

          so some recent anecdotal comment to Malcolm, allegedly calling 80-100 billion, backed up by a statement from well before the telstra agreement was finalised(16 may 2011 vs early mar 2012) with a 60-80 billion tag.

          its not credible after wining access to Telstra ducts – which just about everyone agrees reduces the cost to build – that the numbers jump by ~20 billion? sure theres an acknowledgement from Malcolm that this is an investment now, but the size of the investment is still being misrepresented.

          Kevin Morgan does not count as a source either, BTW.

          • midspace
            Posted 07/09/2012 at 4:56 pm | Permalink |

            Probbaly this Cliff Gibson.

            Sounds like he *might* know what he’s talking about. But the “two partner organisations” line, makes me think he’s talking about companies, ie., those out to make a profit with their work.
            The Government isn’t out to make a profit though. Is that figured in his estimates?
            NBNCo are also doing a lot of the work themselves in planning and designing the network layout.

            • Posted 07/09/2012 at 5:29 pm | Permalink |


              makes me think he’s talking about companies, ie., those out to make a profit with their work.
              The Government isn’t out to make a profit though. Is that figured in his estimates?

              BINGO! That’s the one. Sure, if you need to make a profit, it may very well cost $80 Billion (after all you’d be ASKED to build it by the government and expect adequate compensation) to build at a 15-20% profit.

              Fortunately, as you say, the government don’t require such profit…..

    2. Marcus
      Posted 06/09/2012 at 4:42 pm | Permalink |

      He’s going to have another tilt at the leadership… I can feel it.

      • Posted 06/09/2012 at 4:49 pm | Permalink |

        “He’s going to have another tilt at the leadership… I can feel it.”

        I agree — he is definitely building up to it.

        • djos
          Posted 06/09/2012 at 5:22 pm | Permalink |

          I hope he wins, Dr No as PM would set this country back decades!

          Hopefully if he does take over and wins the next election, he will blame the FTTN NoBN “policy” on Tony and reinstate the full FTTH plan!

          • H Simpson
            Posted 06/09/2012 at 11:42 pm | Permalink |

            That would be a good way out of the hole he has dug.

            I reckon some labour fanbois wouldn’t want to see that happen.

            Myself, I think the NBN is the biggest issue in the next election, and I would happily see the Libs get in if they fully endorse the NBN as it is now planned.

            • Alex
              Posted 07/09/2012 at 9:48 am | Permalink |

              If Turnbull was to again become opposition leader, then turn and support the NBN and even though unlikely, also adopt “iirc his” (not just the current ultra conservative) beliefs into Coalition policy… including Republicanism (as in Australia becoming, not US politics), green friendly policies (global warming, carbon) fair IR laws and opposition to mandatory net filtering….

              Well in reality it would only be the absolute Labor fanbois and ironically the absolute Liberal fanbois who would oppose Turnbull, imo.

              Probably makes him too dangerous to the system and to both sides of politics for him to ever become PM. Fancy having a Liberal PM who is more Labor, than the Labor opposition :/

              Guess he could always do a what’s her name Kernot…!

              • socrates
                Posted 07/09/2012 at 3:54 pm | Permalink |

                Gareth, where are you, Gareth?

                Be afraid, be very afraid…

          • midspace
            Posted 07/09/2012 at 8:58 am | Permalink |

            It all depends on what else he brings to the table and the attitudes of his shadow cabinet.

        • Dan
          Posted 06/09/2012 at 5:28 pm | Permalink |

          Yeah, it’s been brewing for a while now

        • Tom
          Posted 06/09/2012 at 5:52 pm | Permalink |

          You can see it in his latest speech on question time tactics.

      • Posted 06/09/2012 at 5:48 pm | Permalink |

        He’s going to have another tilt at the leadership… I can feel it.

        I hope so….I really do….

        • Alex
          Posted 06/09/2012 at 11:02 pm | Permalink |

          Yeah as much as I hate his anti-NBN BS, I still can’t dislike the guy :/

          • Tom
            Posted 07/09/2012 at 9:29 am | Permalink |

            After Utegate, I find it very easy to still dislike the guy.

            • Alex
              Posted 07/09/2012 at 9:56 am | Permalink |

              True, but they are politicians… LOL

            • jane
              Posted 08/09/2012 at 11:45 pm | Permalink |

              Snap!, Tom. He’s still the same arrogant twat he was then.

      • jingo
        Posted 07/09/2012 at 2:18 am | Permalink |

        Sure hope so.

      • Mattee
        Posted 07/09/2012 at 5:13 am | Permalink |


        Mr Turnbull is being too quiet where he traditionally has belted out hours of diatribe… and placing himself at odds with Dr No and Noose-gang.

        Fight! Fight! Fight!

        We’ve already had one leadership spill this year… one on the Left of the Chamber would balance things nicely. Hehehee

        On another note… I too am glad to see Mr Turnbull finally acknowledging the accounting of the NBN… I just wish they’d hurry up and build the damn thing… I’m not even on the 3-year roll out, so I’m more than just a bit nervous about this!!

      • Belinda
        Posted 07/09/2012 at 8:27 am | Permalink |

        As much as I dislike the Coalition broadband proposal, Malcolm Turnbull would make a much better Prime Minister than Abbott.

        • Djos
          Posted 07/09/2012 at 8:59 am | Permalink |

          Thats like saying sunny days are preferable to wet windy ones! :p

          • NPSF3000
            Posted 07/09/2012 at 10:16 am | Permalink |

            Meh, I quite liked this gem:

            “The experience in other markets (USA for example) is that FTTN networks enjoy comparable ARPUs to FTTP networks ”

            Why have a fast fiber network when you can pay the same and get a crappier version?

            • NPSF3000
              Posted 07/09/2012 at 10:17 am | Permalink |

              Not meant to be a response.

        • jane
          Posted 08/09/2012 at 11:47 pm | Permalink |

          Homer Simpson would make a better PM than Abbott.

    3. skywake
      Posted 06/09/2012 at 4:44 pm | Permalink |

      I think the more interesting thing in Turnbull’s recent blog post was the way he spun his way around a fairly direct question about what sort of guaranteed minimum performance we should expect. To paraphrase his words he basically said that people will get the level of service that they will get and that they only need the performance that they need.

      ……. so what was this about weasel words and spin?

    4. Posted 06/09/2012 at 4:56 pm | Permalink |

      “…and I hope we can now lay this particular micro-debate to rest and move on to more fruitful and subjective ground”.

      Renai +10000 :-)

    5. Posted 06/09/2012 at 5:51 pm | Permalink |

      While it is good to FINALLY see Turnbull admit this ridiculous farce was untrue on the Coalition part, it doesn’t give me any more hope for less spin on the NBN.

      His “Response to the Technology Spectator” Blog piece shows that quite well where he states, essentially, “several contractor mates have told him the NBN will likely cost $80-100 Billion”

      Really Mr Turnbull? Several of my Telecommunications mates (NBNCo., Telstra) state it can be done for about $40 Billion…..

    6. Aryan
      Posted 06/09/2012 at 10:11 pm | Permalink |

      “It seems to me that we don’t simply have a financial deficit, we have a deficit of trust”

      Looks like Mr. Turnbull has been listening to Jon Huntsman a bit…

      • Gwyntaglaw
        Posted 08/09/2012 at 7:43 am | Permalink |

        I think you’re right – his position his quite similar to Huntsman’s. Trouble is, as the voice of moderation within their respective parties, both Huntsman and Turnbull are likely to spend much time in the cold as the ideologues and culture warriors have their turn at the helm.

        Turnbull’s only hope at mounting a successful challenge is if the polls begin to tighten around Tony Abbott. As Leader of the Opposition, Abbott has been tremendously effective where Turnbull was quite ineffective. But as the Libs start measuring out their new ministerial digs in anticipation of next year, the less ideological among them must grapple with the obvious reality that Turnbull is far better suited to the Lodge than Abbott – and not just better overall, also better for them as a future Cabinet. A Prime Minister Abbott would be much harder to work for and flex their ministerial muscles than Turnbull.

    7. Markie Linhart
      Posted 06/09/2012 at 10:15 pm | Permalink |

      “Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.”

      We are to assume are we not, that the above mentioned contractors and engineers DIDN’T get a gig with NBNCo, and even it is true what was said it’s just more rubbish to add to what’s out there.

      Btw, is Malcolm gonna make a move? Yup, think so too…

      • Alex
        Posted 06/09/2012 at 11:14 pm | Permalink |

        Seems they didn’t get a gig with NBNCo, bit did with the Coalition ;-)

    8. jasmcd
      Posted 06/09/2012 at 11:05 pm | Permalink |

      I will look for this article on the front page of the Australian or the courier mail, or SMH OR Fin review or Bulletin or Age…… tomorrow.

      Oh wait, this won’t be taken up by main stream media, it will be ignored or buried on page 35 between the advertisement for a new brand toothpaste and an article about the ever present threat of communism.

      The political mileage has been made, it does little damage to concede that Conroy was right all along. The mind set has been created, the public perception solidified. All in all a well timed move.

      • ozimarco
        Posted 07/09/2012 at 10:40 am | Permalink |

        Exactly! Turnbull talks about “cuttting through the fog of spin and nonsense” while he himself is the grandmaster of spin. Due to his masterful spin over months and years, many people have already made up their mind about the NBN. A small retraction at the end of a response, which will hardly be reported by anyone apart from Delimiter, is not going to change the impression made on the gullible public.

    9. Alex
      Posted 06/09/2012 at 11:23 pm | Permalink |

      Oh they will have the story, it ‘s just that the story will read something like… white elephant, wasteful commie scum NBN… is sneakily being hidden financially as investment not an expense….

      Err just like before :/

    10. Mattee
      Posted 07/09/2012 at 5:16 am | Permalink |

      “Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.”

      Good thing these guys didn’t get the contacts then…. It’d be a whole different ballgame if the cost WAS going to be that high.

    11. NPSF3000
      Posted 07/09/2012 at 10:17 am | Permalink |

      Meh, I quite liked this gem:

      “The experience in other markets (USA for example) is that FTTN networks enjoy comparable ARPUs to FTTP networks ”

      Why have a fast fiber network when you can pay the same and get a crappier version?

      • Bern
        Posted 07/09/2012 at 10:58 am | Permalink |

        “Why have a fast fiber network when you can pay the same and get a crappier version?”

        And that, of course, is the *real* Opposition NBN policy. Let the private companies do it, charge the same amount as NBN was going to charge (or more!), but not actually spend much money on upgrading the infrastructure.


        • myne
          Posted 08/09/2012 at 7:06 am | Permalink |

          Average Revenue Per User has nothing to do with expense.

          In this example it would be fair to say ‘why have a fast fibre network when you’re not going to earn more than a crappier version?’

    12. Observer
      Posted 07/09/2012 at 11:12 am | Permalink |

      Here is a challenge for Malcom Turnbull. Acknowledging the patently obvious about the funding is a good start. Now let’s continue and tell us about your policy without spin, fog or lies. If you are convinced that it is superior to labor’s, surely you would want the world to stop speculating and discover its magnificence.

    13. John
      Posted 07/09/2012 at 11:17 am | Permalink |

      On Turnbull having another tilt at leadership. What if its all been a good cop bad cop ploy all along? Create a demon, then along comes the vampire slayer hero (by comparison, otherwise he would be just an ordinary politician) .

    14. not same
      Posted 07/09/2012 at 11:48 am | Permalink |

      This doesn’t change a thing.. if its a while elephant its still gonna to be a while elephant.

      A rose by any other name.

      • Posted 07/09/2012 at 12:30 pm | Permalink |

        If you mean a white elephant, I fear sir you have made a cardinal sin.

        You have no facts.

    15. Paul Thompson
      Posted 07/09/2012 at 11:52 am | Permalink |

      I honestly wonder what the Coalition’s NBN policy would look like if Turnbull was in charge. Would they still be looking at the FTTN option? Honestly, we have come a long way from Abbott’s charge to ‘destroy the NBN’, and I wonder how much of that is Turnbull’s doing.

    16. Posted 07/09/2012 at 1:10 pm | Permalink |

      where did you get that photo?!

    17. Boss302
      Posted 07/09/2012 at 2:23 pm | Permalink |

      Just remembering how savage Turnbull was to Rudd over the utegate affair, I felt it hard to take his criticism of Abbott seriously, Seeing as it has been party policy to keep kicking them in the shins weather their right or wrong doesn’t matter, The press reports it as fact without question and there are no umpires watching the game!

    18. Boss302
      Posted 07/09/2012 at 2:32 pm | Permalink |

      I forgot to add that id rather see Turnbull in power than Abbott ! as Abbott scares the hell out of me !

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