Egan’s Boast About Australian Public Finances
This letter to The Financial Times from Michael Egan, NSW Treasurer from 1995 to 2005, makes valid points about the extent of budget honesty in Australian jurisdictions compared to Europe, even the UK:
Ian Ball, CEO of the International Federation of Accountants (Governments guilty of deficient accounting practices, September 29), argues that most governments don’t know what their balance sheets look like and don’t record assets and liabilities other than cash.
I just want to point out that his criticism does not apply to any of the Australian governments, federal or state, which for many years have been providing comprehensive financial statements including an accrual operating statement, a cash flow statement and a balance sheet which encompasses all of their assets and liabilities, both cash and non-cash.
For a number of years (1995 to 2005) I was Treasurer of New South Wales, Australia’s largest state. I often attempted to compare my own state’s financial performance and position with other jurisdictions around the world, but nearly always without success. There was simply no comparable available data. For example, I could never discover how the UK, under Gordon Brown’s financial stewardship, accounted for the liabilities which the British taxpayer assumed for public infrastructure projects which although initially financed by the private sector were ultimately paid for by taxpayers.
This simply meant, as far as I could work out, that PFI projects in the UK were embraced because they hid the real level of public liabilities. In Australia, on the other hand, they were accounted for in the same way as publicly financed investments and were only entered into if it was believed that they provided some additional value, such as transfer of risk.
Anyone wanting to see how their own governments financial reporting compares with best practice should take a look at the annual budget papers of the New South Wales Government (www.budget.nsw.gov.au).
The Hon. Michael Egan.