NO.088

LABOR’S BLACK HOLE
ECONTECH IS RIGHT AND LABOR WRONG

Labor claims a $566 million saving against the Budget by not selling Telstra. That saving doesn’t exist.

Labor says that the saving arises because the Budget is premised on instalment receipts (see Financial Review, 26 October 2001, page 9). This is just factually wrong. The Budget does not have instalment receipts.

The Budget accounts for three equal sales commencing 2003-04 continuing in 2004-05 and 2005-06, (see Mid Year Review Table B3, page 56).

The Labor Party claims a saving because it leaves out the full public debt interest savings that comes from paying off debt.

Labor could claim in the forward estimates period that its decision was neutral. It does more than this. It claims it makes money. It does not. Correcting this error means Labor’s promises now reduce the PEFO bottom line to:-

And then there are the loans

Unless Labor can name the interest rate, the term, the security, and the chance of repayment it cannot maintain its capital funding, for example, to the Aged Care sector is a loan. What is it going to do to get repayment? Move in as mortgagee in possession evict the patients from their beds and sell the premises?

Deducting these loans means Labor would have the Budget in cash deficit in 2002-03. And now it is well on the way in 2003-04 as well.

Friday, 26 October 2001

Contact: David Alexander, 0418 210 601