By Stephen Mayne, truth in government accounting obsessive

The Australian’s economics editor Alan Wood has admitted to Crikey that he was more than a little generous with the Howard Government in his budget coverage. This is what we wrote in our special budget edition:

State and federal governments love to deceive the public by talking about “net debt”, but often they’re netting off assets that are actually earmarked for other liabilities. This year’s budget once again makes the claim here, with net debt put at just $16.3 billion in 2004-05. But check out this chart and you’ll see that by June next year the Federal Government will have increased gross borrowings to about $45 billion. That’s hardly eliminating the Commonwealth bond market when you’re still running the biggest debt pool in the country. Incredibly, respected commentators like The Australian’s Alan Wood still buy the government’s garbage as today he wrote: “But as Peter Costello pointed out again yesterday, debt has been eliminated.”

We emailed Alan the following question last week: “Woody, do you stand by your claim about debt, given that gross federal debt will be $45 billion by June next year?”

He replied this morning: “To be strictly correct I should have said net debt, but it doesn’t change much. There are assets to balance the gross liabilities and I think keeping a bond market alive is a good idea.”

We’ll be closely watching the coverage of tomorrow’s NSW budget and locked up hacks are hereby placed on notice to be very careful about believing net debt and surplus claims. The Bracks government claimed it produced a surplus earlier this month when this was only at an operational level and excluded capital works. The Carr Government have been masters at shifting debt outside the budget sector into electricity companies, and even people like Terry McCrann have fallen for it, as we explained in our April 17 edition:

The only thing more annoying than governments telling porkies about their debt levels is so-called guru commentators falling for it. Earlier this month, News Ltd’s Terry McCrann made the following extraordinary claim in The Weekend Australian in a column discussing infrastructure needs and regulation of where the investment dollar goes:

Now we have $650 billion in super funds and growing by $50 billion or more a year. There is, on one hand, a need for a place to invest that money. Enter the second biggest change: the almost total elimination of all government debt – commonwealth, state and semi-government; along with, of course, the almost total elimination of the actual semi-government entities themselves.

Now, I don’t know about you, but when Australian governments collectively have more than $100 billion of gross debt and almost $150 billion of unfunded superannuation liabilities, such a claim is laughable. Similarly, when governments still own more than $100 billion worth of “semi-government entities,” to claim this is “almost total elimination” is just embarrassingly wrong.

Where do you start in listing all the debts and assets that McCrann claims don’t exist any more? Take NSW as an example. The taxpayers still own more than $20 billion worth of water and electricity assets, and the state as a whole has more than $20 billion of debt outstanding, as you can see from this press release in January gloating that debt is at a four-year high.