The Auditor-General highlighted this week some shortcomings in the way the Government has gone about privatising the banking services of the federal bureaucracy. In doing so the Auditor criticised the conduct of the Department of Finance.
The Opposition has seized upon the Auditor’s report saying that it shows the government wasted $151 million of taxpayers money. Finance Minister Senator Nick Minchin explained – probably correctly – that that was not the case, nonetheless some taxpayer money has been lost – probably to the big banks, due to procedures which could have been more carefully implemented and monitored.
Senator Minchin, however, was sensible enough to acknowledge the shortcomings identified by the Auditor and to adopt his recommendations for their rectification.
It is certainly the case that the Department of Finance did not put into place a framework that would have maximised whatever benefits there might have been with privatising banking services and that its failure to implement a system of information flow meant that some interest was lost to the banks’ gain and the taxpayers’ loss and that internal money flow put unnecessarily high amounts of money in the hands of agencies to the detriment of Budget neutrality.
It may well be that the total interest lost is something less than $2 million and that the giving money to agencies unnecessarily will not result in any losses. Nevertheless the auditor’s report indicates that the ideological drive to privatisation is resulting in bureaucratic and governmental blinkers that blind those who look after taxpayers’ funds to the possibilities of loss and cause them to only focus on the possibilities of savings that usually prove illusory.
The Government which has had a fairly good record on economic and financial management is now looking far less competent. The latest auditor’s report comes after a series of financial blunders and costly policy changes that will result in taxpayers either paying more of receiving less. The outsourcing of federal government IT did not meet expectations; nearly $5 billion was lost on foreign exchange dealings; potential losses from the Government’s ideologically driven program to sell and lease back buildings occupied by government agencies; and the $500 million loss on overseas defence and other purchases because transactions were not hedged against currency changes.
In addition the Government’s border-protection and Pacific solution policies look like costing a small fortune with the estimated cost of $400 a day to keep asylum seekers in Papua New Guinea. And promises made in the lead up to the last election – such as the abandonment of petrol excise indexing – look like making the next Budget very difficult for the Government.
The conclusion must be – given the economic boom – that to the extent the Government has a budgetary problem, much of it must be of its own making.
On the issue of whether it was wise to out-source the banking of Government departments to the private sector, it appears that whatever minor gain their might have been with private-sector efficiency has been wiped out by the loss of the economies of scale foregone by not having all departments use the Reserve Bank of Australia as their banker.
Meanwhile, the private banks are laughing all the way to the . . . .
In this third term, the Government will need to rebuild its economic and financial credentials – the field in which the conservatives usually excel against Labor. To do that, the Government and the departments it directs must pay closer attention to the practical effects of policy rather than insist on ideologically driven policies of out-sourcing and privatisation for their own sake.