It is common practice for an incoming government to declare the cupboard was bare and that the previous government had hidden the grim truth about the state of government finances so it would not be possible for the new government to deliver all its promises and run a balanced or surplus budget.
The new ACT Labor Government was no different. Upon attaining government it immediately set about redrawing the fiscal landscape. It ordered a commission of audit to look at the books and determine the state of the ACT public account as at October 31.
Surprise, surprise, the commission of audit found the cupboard bare. Indeed, it found at $5 million deficit. This was a completely different picture from that painted by the Liberal Government as it went into the election. It said it was a responsible government that had maintained surpluses.
Where does the truth lie? We might not know for some time, if at all. Moreover, the method of accrual accounting, adopted by governments throughout Australia in the past decade, allows for a fair degree of greyness in determining a government’s fiscal position – within very defined parameters. On the other hand, the old system of cash accounting would yield a precise result, but it could well be that several chunks of that cash should be spread over many years rather than [put into one year’s result, or was of a capital nature or was a windfall, so the overall bottom line was well off cue. Accrual accounting, on the other hand, looks at the overall picture and spreads the cost and revenue more realistically, so that over the long term, a truer measure of a government’s position is made from one year to the next.
It is in this transitional context and the context of setting the measuring dogs out in the middle of a fiscal year that Labor’s commission of audit must be read. The reading was a misreading. The commission took a snapshot of the cash position of returns on investments as at October 31. That should not have been done in the context of an accrual system. If it had not been done, the return would have been substantially high – but perhaps not as high as the Liberals suggest.
The truth probably lies somewhere between Labor’s estimate of a deficit of $5 million and the Liberals’ estimate of a surplus of $58 million. Suffice to say that the Liberals left Labor with an operating surplus. After six years of government the Liberals turned the finances of the Territory around from chronic deficits to projected surpluses to reduce outstanding debt. Several more years of surpluses are still needed to expunge the debt incurred by the Follett Labor Governments and the even more fiscally ill-disciplined Liberal-led Alliance Government before 1995.
The test is now upon Treasurer Ted Quinlan to persuade his colleagues that if there is a choice between breaking election promises and an irresponsible running up of budget deficits, the former is the preferred choice. In doing so Labor might well like to blame the bare cupboard left by the Liberals, but such a claim would carry little substance.
In future, give that the ACT has a fixed parliamentary term, surely we could avoid these post-hoc assessments and have a Treasury assessment of the financial position four to six weeks before the election when Treasury has no idea who will be the new government so will be less open to the accusation that it is pandering to the view of a newly elected government.