Hockey repeats inaccurate NBN claim


news Shadow Treasurer Joe Hockey has continued to publicly repeat a factually inaccurate statement regarding the accounting treatment of the National Broadband Network funding as a capital investment, maintaining that the funding should be treated as an expense, despite direct evidence to the contrary, including the acknowledgement of fellow Liberal MP Malcolm Turnbull.

Over the past several years, a number of senior Liberal figures, including Abbott, 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. It is this argument which Hockey continued to make this week.

In a new interview on ABC television on Tuesday morning (available in full online), Hockey repeated the incorrect statement. Speaking about the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) delivered by Treasurer Wayne Swan this week, Hockey said: “He is trying to pretend he is delivering a surplus which is going to reduce the debt burden on the Commonwealth budget.”

“The fact is that the Commonwealth Government is going to borrow money, and yet they’re trying to pretend they’re having a surplus. For example, they’re borrowing off-budget for the National Broadband Network. They’re borrowing off-budget for a clean energy finance corporation. Normally these initiatives are on the budget, therefore it’d be a significant deficit.”

Hockey made similar comments earlier this week in a similar statement on the MYEFO. “Once again, Labor tries to con Australians with yet more money shuffles, Hockey said, slamming the Federal Government’s decision to introduce monthly PAYG tax for large companies. “Without these changes, Labor’s promised Budget surplus in 2013-14, an election year, would not be a surplus, but a deficit of over $3 billion.”

“This money shuffle is on top of at least $10 billion of money shuffles for the current financial year, when the Government is also keeping almost $6 billion of NBN spending ‘off budget’. Without these accounting tricks, Labor’s almost invisible $1 billion surplus for this year would be a deficit of $15 billion or more.” The comments came just a day after Opposition Leader Tony Abbott separately said a Coalition Government would “pause” the NBN project and save money in the Federal Budget by doing so.

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 and could thus be cut to save money. 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 a capital 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.

In addition, Shadow Communications Minister Malcolm Turnbull himself, who oversees the NBN issue for the Coalition, has recently acknowledged that the NBN budget treatment is correct. In early September, facing substantial criticism on the issue from the Government and industry commentators, 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 appeared to acknowledge the correctness of the NBN budget treatment. “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 said at the time. Turnbull’s statement is partially true; the NBN does add to the Government’s debt burden, but only in the short to medium term, not the long term; as that debt will be paid back by NBN Co under current projections.

This morning Delimiter contacted Hockey’s office and highlighted the error, pointing out that industry commentators (including specialists from the accounting profession), the Parliamentary Library, the history of Federal Government capital investment and Turnbull himself had acknowledged the correctness of the budget treatment of the NBN. However, despite the evidence, a spokesperson for Hockey’s office said it was the Shadow Treasurer’s view that the NBN budget treatment was incorrect. They declined to provide evidence for Hockey’s claim, highlighting only previous speeches given by Hockey in the area, which do not provide evidence for Hockey’s statement with regard to the NBN.

Hockey’s comments come as the latest in a long line of inaccurate and misleading statements the Shadow Treasurer has made about the NBN project. Earlier this month, for example, Hockey claimed the National Broadband Network could cost as much as $100 billion to build, despite the company’s own estimates showing that it will require around $37 billion of capital injection from the Government and eventually make a return, paying back the investment with some profit on top. In June, in another example, Hockey inaccurately claimed that 4G mobile broadband had the potential to be “far superior” to the fibre technology of the NBN.

I’m sorry, Mr Hockey, but you are simply wrong on this one, and I will continue to point this out until you stop making false statements about the NBN in public. You cannot change facts of accounting standards simply by virtue of your opinion alone. As I wrote yesterday:

“I’d say we have a fairly serious situation if the Shadow Treasurer cannot tell the difference between a capital investment and an expense. Wouldn’t you? I’m only a small business owner who almost failed Accounting 1A at university, but even I know the difference between the two. I am tired of writing about this issue. When even Malcolm Turnbull has acknowledged that the Government’s accounting treatment of the NBN is correct, why does Joe Hockey continue to make factually incorrect statements on this issue?”

Image credit: Office of Joe Hockey


  1. If Mr Hockey wants these capex costs to be part of the budget calculations, he also has to acknowledge the money generated through the bonds as income. This would create a much bigger surplus situation, and make his argument redundant from that angle as well.

      • I propose a website called

        On it are answers to the 200 most frequent misconceptions about the NBN and also where the risks in the NBN project actually are and what has gone wrong and what hasn’t. And the usual crap that that either Conroy and NBN Co spout on one side and Turnbull and the coalition members on the other.

        And all of the answers are given in several forms.

        There’s 100 characters for Twitter (with hashtag and URL), 120 characters for Twitter (with hashtag or URL), 140 characters (for neither), YouTube comment length (500 characters), three paragraphs, five paragraphs and, for the ultimate detail and with many sources and references the 9 paragraph mini-essay.

        And a button next to all of them that says ‘copy’.

        After a while, once this database has been established, we can set up a JSON API and let people run scripts that monitor the usual websites, like Twitter, or relevant YouTube videos, or Whirlpool, or Delimiter, or the SMH or Newscorp papers or Facebook pages, and we can automatically reply with the script. I think some simple regex might even be enough considering how formulaic the discussion around the has become.

        We can automate this whole discussion, we really can. We have the technology.

        We may even have the upload bandwidth.

        • This sounds awesome, I thought of something similar but not in as much detail as you!

          [random anti-NBN ranter]: “blah blah, waste, blah blah wireless, etc. etc.”

          [response]. See answers 12, 47, 52 and 93.

          Start with as an initial Q&A seed!

          • Charles , i had the same idea, even registered a domain… then realised i was beaten to the punch :P


            Whirlpool and Delimiter kidn of have it covered also

        • Nice idea, although I’d probably call it:

 Where the cloud meets hot air

  2. Oh come on Renai! It’s been explained before! All this supposed “evidence” cannot be treated as “facts” because they’ve been “cooked up” by the government! And we all know that politicians lie!

    But it’s ok! We can trust the Coalition to be up front and honest with us! (unlike the current incumbents! bunch of liers that they are!) So if Hockey say’s so then it must be true! It’s just the government pulling wool over our eyes! Because they said so!


  3. So despite long entrenched Accounting Principles and the advise of experts in the field Hockey has determined that things should be done his way so he can get a political advantage.

    Sorry but Mr. Hockey is just another bully who has decided he will only ever play by his own rules. He is a disgrace to the profession of being a politician and in any other profession would be subject to disciplinary action. Hopefully the people of Australia will dish out some discipline of their own in about 12 months time.

  4. And why do some people want Hockey as Treasurer again, jeez. I think we are all getting fed up with the bullshiet that they are pedalling.

  5. I watched that live; and it shat me up the wall. I get it the interview was on a non-NBN topic; but he just lied at you guys CALL HIM OUT.

    Maybe I’ll tweet this page at the news breakfast presenters and ask them why they didn’t call him out on it.

    If I can individually make aware each supposed “journalist” about each individual lie they might be told maybe they will have the guts (or brains) to call someone out the next time they hear it.

    • It’s hard because the ABC presenters in this case aren’t experts in any of the subject areas being debated. They simply don’t know the specifics of niche programs like the NBN. It takes gradual exposure for them to get this.

      • it’s interesting really.

        I’ve often wondered if any of the other great Australian infrastructure projects were anything like this (Snowy scheme, Great Ocean Road, the east-west rail link to name just a few) in their day-to-day “news”.

        Did politicians from those times act like our modern ones? Was it only the passage of time that erased the comments of the Abbotts, Hockeys and Turnbulls from those histories and left us with the legacy of the actual achievements themselves?

        • And how much progress have we unwittingly missed out on thanks to the Abbotts et al. getting their way?

        • “Did politicians from those times act like our modern ones? Was it only the passage of time that erased the comments of the Abbotts, Hockeys and Turnbulls from those histories and left us with the legacy of the actual achievements themselves?”

          Pretty much. Except now their is more media and more commentators. We also get more feedback from the public. Today with the internet it’s like an information and opinion (and retoric, spin, all political words for lies and deception) deludge.

      • I wonder how much critical analysis has been avoided by politicians calling snap press conferences to avoid allowing journalists to be properly briefed / knowledgable journalists to attend.

  6. Hockeynomics will revolutionise Australia once the Liberals are in, Revolutionise I say!!

    • I don’t care what his economics looks like so long as he can refrain from borrowing $50 billion per year.

      • @Tel

        My goodness I’m glad we are free to vote individually…..I tend to vote for a party’s policy….not whether 1 man is capable or not in economics….

        • The policy is what creates the debt. Cause and effect… worth putting some study into. I know I suggested you do some reading and you were offended, so I’ll not bother making that suggestion a second time.

          • @Tel

            Short term debt for long term gain and all debt + interest to be repaid. But of course you don’t believe they WILL make the money back….even AFTER complaining everybody is going to be forced onto it and therefore the revenue is guaranteed…

            What was that about reading?….

      • You don’t care if the Treasurer of Australia has no idea about economics (as long as he represents the right/your party)!

        Enough from me, Renai will be starting to see red.


          • If its not the government borrowing the money then its the private sector – yet you know how well they did looking after the comms industry for the past 10 years, and you prefer them over something we can own ourselves? Jeez.

  7. There’s a very good reason that Hockey’s nickname is Sloppy Joe, and it’s not after the beef mince sandwich served in US cafeterias.

    • Like some creepy guy trying to look friendly and jolly so that he can give lollies to the kids at a playground?

      Nah, I don’t know what you mean.

  8. Its only an investment.. if you get something back.. It could all fall in a heap if they dont get the numbers up. (They probably wont).

    If your write off money.. and never get it back.. its an expense!

    • And… herein lies the folly of the anti-NBN argument (this comment is not aimed at you personally Hazz)…

      Every Australian is being forced onto the NBN monopoly…

      Look at the current numbers, it’s a white elephant which will fail…


      • Indeed, the customer base is basically guaranteed.

        This isn’t like building a sports stadium and hoping that ‘they will come’. Everybody has to use it. Even if they rely on 4G (and we know that this is a misleading idea anyway), then the fat pipes supplying the bandwidth will be NBNco owned.

        Hazz’s post is exactly why we need more facts and less FUD about the NBN.

        • Wrong as usual, Telstra and Optus own the majority of backhaul fibers into wireless towers, and some significant number of towers backhaul onto microwave links anyhow.

        • @Tel

          Really? So a product that is LESS expensive in many examples, than ADSL, which has 65% penetration, and is BETTER, is ‘forcing’ a product on people…..

          You have some very strange ideas. What is happening is called market apathy. Many people do not bother looking every few months at the best deal they can get for their internet/phone etc. But if they are OFFERED a better deal, they will usually take it. This happens over time, not instantly as soon as the NBN is switched on.

          • So if the product is so great and so cheap, explain to me again why the government needs to force people to buy it?

          • Just like we were forced to buy copper based comms and forced onto bitumen roads do you mean?

            You know, I am even forced to stop at a red light… how dare they.


          • Hmmm, I dunno, maybe because the majority of people wouldn’t know a good deal on telecoms if it hit them in the arse??

            Seriously Tel, is that the BEST argument you an come up with?? Fibre IS 100 times better than copper. That is fact. It is also in most cases on the NBN CHEAPER than copper. That is also fact. The fact that people may or may not take an interest in their telecoms 2 months after it goes in is neither here nor there. They WILL when RSP’s ring them.

          • Hi tel,

            let me explain it for you as logic appears to be difficult for you.

            The government had decided to replace our current infrastructure with fibre to the premises. As a result, all those people currently using copper, will be moved to fibre. As there will be so many people using the fibre it will be cheaper than using the copper for a superior service.
            How is that possible your brain just slowly registered? It’s ok to be confused, I’ll do my best to explain.
            The company operating the network has been asked to make a 7% return, instead of 20%+ on its assets, is step one.
            Step 2 is critical, they structure pricing in such a way that those that don’t want an upgrade from ADSL speeds, pay relatively less than those that want newer higher speeds.
            That way, compared to ADSL many nbn plans look ‘cheaper’.
            In addition, the savings from having built the network such that everyone must use it (volume savings, Luke cost co!) Means that everyone gets a better service, how? Well, when everyone pays the maintenance of only one network, instead of 2 or 3 seperate cable networks then only 1 set of technicians are required to maintain it, instead of every company with a network hiring 3 full sets of people to maintain it!

            Finally, the corporate plan has outlined the estimates to explain all of this in more detail, all whilst omitting business and high volume corporate use almost entirely, which can only increase projected return. (certainly can’t make the network LESS viable having more customers right!)

            hope this helps.

          • I missed the bit where you explained how such a great product requires forcing people to buy it.

            I guess answering a simple question is a bit beyond your grasp.

          • So what is the difference to now where Telstra own the monopoly of the Copper to the Home in comparison to the NBN owning the Fibre to the Home? Oh that is right, the only difference is that one is a Private Market entity and the other is a Public Owned entity, which we also know the Market is ideologically opposed to as it distorts their pyramid financial system.

            Financially the NBN is a brilliant methodology to upgrade our telecommunication infrastructure, but it re-nationalises what was for a long, long time, an asset the Market lusted after. Naturally, after just getting to finally own it, after getting Honest Johnny to con the Australian people into selling them what they already owned, and implementing the extortion (that is exactly what it is) that always follows (but it is ok you know, it’s a profit) when a private monopoly occurs, to resolve this Market holding the Nation to ransom, the Government at the time looked for a way out of this impasse. It found one, but the Market saw it as anathema to its ideology that everything should be privately owned and sold (Capitalism).

            So naturally, as the Liberal’s always seem to be rabidly extoll anything that is good for profit at the expense of everything else (when did they lose the way from Menzie’s vision and why he left the UAP?) as unfortunately they have become so predictably disposed to do, whilst blindly turning a blind eye to the lies (marketing campaign) that were all promise and never seem to actually become to be anything at all like what was promised in the end, they will look after the Interests that will profit from the system they themselves help to set up, which in turn will look after their financial position to have a nice fat cheque book to utilise at the next election to hold power. (Whew! Sorry for the long sentence)

            Now, don’t get your knickers in a knot, Labor does the same but with the Unions, so I’ll defuse your indignation right now. *sigh*

            So the argument, just like so many contentious issues that are argued these days, is all about Market forces demanding it be the dominant player in deciding the fate for Mankind (read this as YOU). So in the end, regardless of whatever the subject is, NBN, Global Warming or Corporate Welfare, in the end it is about who owns and controls the infrastructure on which you depend to live in this modern age when it comes to services that are most efficiently delivered by a natural monopoly (Yes, they want to own the Biosphere too). Private or Public? Personally, I’ll take Public, as in the end the profit comes back to me to provide something nice we can all use against someone else utilising it against me for their personal profiting leaving me with the mess to clean up after them. Yes, I know you love following people around and cleaning up their left over mess. You crave it.

            So Tel, I know you don’t own your own home as debt is so bad to Universe will cease to exist if you do (or are you being a Troll and just hypocritical for fun) or do you discriminate financially saying Public can’t have debt, but Corporations can. Well why should a Corporation have the right to own property like a person when it is not a person? As you see, you’re arguing a cause that is something akin to a petulant sociopathic child demanding that they want it all to happen the way they want it to be. Their way, or no way! They are utilising years and years of human psychology amassed to great effect as a tool to gain their desires by getting gullible people to champion their cause in the social arena.

            Feel gullible? Don’t worry, many are and we have all been to arrive where we are today. Don’t feel bad about it. But don’t be blind to it. Fool me once, shame on you. Fool me twice, shame on me. Fool me thrice………….

          • Wow, you really are having a hard time Tel!

            I answered your question. We force people to buy it because it makes it cheaper for everyone.
            OMG OMG forced to buy it!!! Get over it. They force me to “buy” the powerlines outside my house. They force me to “buy” the roads outside my house. (last I checked, I couldn’t purchase a competing car-registration, or pay competitors taxes to build alternative roads).

            Hell, when you have dirt roads they force you to pay the dirt-bitumen upgrade!.

    • “If your write off money.. and never get it back.. its an expense!”

      Not if it was capital expenditure which didn’t have an expected depletion investment shares. In that case it is a capital loss.

      It is only an expense if the capital expenditure has a limited useful life and is usually recorded proportionally in the Profit & Loss A/C eg Depreciation of Assets.

  9. you think that journalists about to interview someone … might do some research ?

    hmm .. what has this person said recently… fact check it …

    • Agree Stoffs. It’s not hard just to Google a little bit of the topic you are about to interview someone about so you can fact check them. Even before going into meetings, or visiting clients, background fact checking has saved my arse more than once.

  10. Sorry, but a very large percentage of older voting Australians would have heard this, and in context – heard it on the ABC – and will now consider it fact.

    I reckon we are on a path towards something interesting in politics where social media and fast fact checking means that the pollies will not be able to hide behind the ‘belief that blah blah is wrong” when everyone has already seen the evidence that this “belief” is actually spin and bullshit, being able to immediately and very publicly call out the “lying through his bloody teeth politician” out on it. (not that I am suggesting that is what is happening here – of course)

    But this is a generational change that won’t happen this election and probably not before the next. The turning point will be some form of honesty for pollies legislation once one of them gets caught out big time – by all ages of the voting population. Of course the real turning point will be honesty for pollies legislation that isn’t full of loop holes and get outs!

    • I think the problem is going to be with the younger voters who have developed a short attention span to fit in with twitter etc. It has probably already been tweeted a thousand times by these young people and plastered all over Facebook. They don’t know how to do research and believe anything they see on TV or read as being factual. They are losing the ability to analyse a statement for facts and correct interpretation. All they care about is there own image and how many friends they have on Facebook and followers on twitter.

      Yep the younger generation are going to ruin it.

      <sarcasm /

      • You might think you are being funny but I have heard conversations by high school kids parroting all the trash put out by the media. Just because they are young doesn’t mean the get the technology. The way they talked you’d think the NBN was the root of all evil. I have heard that in the past when my kids were in high school. Remember they are usually fed information (and information), they don’t seek it. They have more than enough seeking to do work their studies.

        • There is a difference between humour and sarcasm.

          As far as I am concerned generalising about a persons capabilities based on their age shows the ignorance and prejudice of the proposer of such an argument.

  11. Surely the coalition advocates user-pays projects?

    Off-budget borrowing to fund social programs or even most capital works is a really bad idea, because the expenditure cannot be recovered, and the people get saddled with a debt and no means to pay it off.

    The NBN is different, because even the conservative the wholesale revenues forecast in 2010 would repay the construction borrowing. In fact, with 40% of Kiama premises now using NBN fibre services, we see 82% takeup of faster services than ADSL theoretical maximum speeds, proving emphatically that the revenues were massively under-forecast.

    The NBN is in fact user-pays. NBNCo borrows at cheap rates due to government underwriting the loans, builds the infrastructure, then repays the loans and generates a profit, entirely from customer revenues.

    Joe Hockey of course knows this, and probably also realises that the coalition will certainly leak regional votes to cross benches as in 2010 if it stupidly insists on being the only “no-fibre” party in 2013. So the policy will change in favour of the NBN, but, if they leave it too late, they run the risk that the electorate may not believe it, and we could yet see a Green Labor minority government instead of an easy coalition win, exactly as happened in 2010.

    • Wrong. The NBN might become user pays, at some future date. Right now the NBN is pumped on borrowed money (mostly from China).

      • @Tel

        What??? The NBN is a user pays utility.

        Is a new power grid not user pays while the capital works are going on to build it??

        Is a toll road not user pays while it is being constructed??

        You are simply spinning the word ‘pays’ as in, the capital works aren’t being ‘paid’ for by the user, therefore it isn’t user pays. If that were how the capitalist market were built….nothing would EVER be built. Do you think Telstra expected users to pay for upgrades to ADSL in economic areas (not subsidized areas)?? No, the capital works were done AND THEN the user pays those off.

        That’s the biggest spin I’ve heard in a long time….

        • The NBN is intended to be a user pays utility. At some future stage it may even achieve that.

          Right now, what it actually is, is not anywhere near paid for by the users.

          • Why is at that all common sense is overlooked by those who vehemently oppose the NBN on political grounds (gathered by reading every politically motivated comment herein).

            The NBN is a 10 year roll out and really apart from trial sites and a few initial areas, is yet to really kick in.

            How many people paid to cross the harbour bridge before it was completed? Silly analogy… just as silly as suggesting the NBN should be making a motza immediately.

          • @Tel

            User pays, or beneficiary pays, is a pricing approach based on the idea that the most efficient allocation of resources occurs when consumers pay the full cost of the goods that they consume.

            The NBN as a whole is not paid for by individual users. They pay for THEIR goods/services. You are imply being disingenuous and trying to twist its meaning. The NBN is providing services. The cost of those services is being paid for by the user. It is a user pays system.

  12. 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 and could thus be cut to save money.

    Joe Hockey is completely factually correct about his opinion as to what should be done, just as anyone else is factually correct as the decider of their own opinion.

    Joe Hockey may or may not be factually correct about some or other particular accounting standard, but he didn’t make a claim about any particular accounting standard. For that matter, neither has this blog linked to any accounting standard. Last I checked, the Parliamentary Library of Australia is not a recognized accounting standards body.

    For what it’s worth, the relevant accounting standard is called, “Mark to Market” which you can find with a tiny bit of web searching and it was very widespread right up to late 2008 / early 2009 when it was “temporarily” suspended and after that the banks (and governments) just hoped the problem would go away (hint: the problem won’t go away). If the Commonwealth did in fact mark the NBN to market value (either by government valuation standards which are highly conservative, or by any reasonable speculative estimates) then it would show up on the books as an expense (being the cost less the estimated asset value).

    Why Joe Hockey has trouble explaining this to people I can’t say, but I’m sure he is doing his best. Just a reminder, the magic word is, “Mark to Market”.

    • @Tel

      Last I checked, the Parliamentary Library of Australia is not a recognized accounting standards body.

      You do realise the library keeps a copy of said standards…..

        • @Tel

          The library simply went for a look in its collection, found the relevant standard and issued a statement on behalf of the government. They did not MAKE the standard nor do they need to. They looked it up. You were suggesting the library was not an accounting office, as in they were not qualified to make a standard They don’t, they just look it up, which they did.

          I don’t really understand why issue you have with it. There are at least 3 people that oversee the collection who understand economics and finance. Go look it up.

  13. Hockey has disqualified himself from commenting about Australia’s finances. To confuse publicly the definitions of “asset” and previously “audit” from his shadow cabinet position means everything else that comes out of his mouth is not worthy of the air pushing it.

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