Julian Hill (Bruce, Australian Labor Party) Share this | Hansard source

I want to raise an issue and pose a few questions to the minister, which I think warrant serious consideration and response, regarding the government's so-called innovative financing—I think they call it 'innovative financing' themselves—colloquially known as off-budget investments, which in the worst case scenario is becoming an $80 billion ticking fiscal time bomb for the nation. I say at the outset I do understand there's no formal accounting definition of 'off budget', but entities or investments outside the general government sector as presented in the budget papers are commonly referred to as being off budget because they get excluded from the calculation of the government's budget deficit or surplus. The kinds of things this covers, Minister, are by way of equity investments, concessional loans, contingent liabilities, guarantees and so on. Of course, assets acquired or funded through equity investments must generate a commercial rate of return, cover their cost of borrowing and a bit more and repay their capital investment in a reasonable time frame. There are of course legitimate ways to use this kind of financing. For example, the Moorebank Intermodal Terminal under the previous Labor government or the government's decision around the Western Sydney Airport strike me as quite legitimate uses of off-budget funding.

But there are serious risks. If things do go wrong they pose a fiscal time bomb in that if the equity investment doesn't get the commercial return which is projected or if something happens to impair the valuation—or indeed if the government of the day is cooking the books—then at some point that loss comes straight back to the budget, blows out the deficit and, if sizable, can impact our AAA credit rating and blow out net debt. There is a worrying temptation for any government to overstate the benefits or inflate asset values, and the problem then becomes one for future governments and taxpayers.

So it's critical that taxpayers, through the parliament, are absolutely confident that the government isn't cheating or fiddling the books at any point in time. I believe, having looked at the budget papers, there are worrying signs. The growth has been remarkable. Over the last five budgets, there is now a total of $84 billion of easily identifiable off-budget investments. There is about $55 billion worth of equity investments and about $29 billion of concessional loans. It's a little unclear how you count WestConnex—the government still can't tell us where that tunnel is actually going in Sydney, but that's a minor detail: just keep digging and it will pop up somewhere; give it a few billion. I do acknowledge you can identify most of the investments sitting underneath that total, but the budget documents don't provide sufficient detail for anyone to assess how much of the commitments have been drawn down across the portfolio of investments. The government has flagged in the budget papers explicitly and in all the pre-budget waffle—we hear in question time from the Prime Minister in question about this mythical $75 billion pipeline of infrastructure and the rail lines he can build with no money that he keeps announcing—that it's preparing to use these methods more extensively. So I would ask you, Minister, can you outline precisely for the $84 billion: which projects, what are the risks, where can we find this information and how much of these commitments for each instrument are drawn down and will be drawn down? And where is this information publicly available? The reason I'd also say alarm bells are ringing is—I will give a couple of examples. With the Inland Rail project, the government's now put in nearly $9 billion of funny money. You can only describe it as that because former Deputy Prime Minister Anderson's review found that it would not repay its capital, even in 50 years. This is a serious issue.

Let's be clear what you're doing, Minister, with this set of budget documents and this investment. You're borrowing $9 billion for an Inland Rail project. You're pretending that it's going to make a commercial return above the cost of borrowing and repay its capital in a reasonable time frame. That's what is required. And yet your own independent review by the former Deputy Prime Minister, National Party doyen, John Anderson, said, 'That's not going to happen. That won't be repay it, even in 50 years.'

The former CEO of the Australian Rail Track Corporation told the Joint Committee of Public Accounts and Audit—I was stunned that he actually admitted it; it was an outbreak of honesty. I noticed he's not there anymore. I don't know what went on there—he probably just retired. But the revenues that flow to ARTC won't cover the full capital cost and provide a return. So that's the CEO of the ARTC saying, 'This $9 billion we've just hidden over there isn't actually going to be repaid. It doesn't provide a commercial cost of return.' On the face of it, if that was true, you'd say, 'You're fiddling the books.' So can you explain to the parliament, then, how this is classified as an equity investment—you can build infrastructure with grants, give somebody some money and build it; that's the traditional way—and what the consequences are if some is written off, and what impact that will have on the deficit?

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