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