Tell the truth over federal debt, Cossie

ABC radio's chief political correspondent Chris Uhlmann was only half joking yesterday when he claimed the remarkable 200 point afternoon stockmarket rally coincided with reassuring statements from Treasurer Peter Costello during Question Time.

Sure, the market bottomed at 1.51pm and Costello started speaking at 2.05pm, but this was actually a regional phenomenon as most Asian market rallied in afternoon trade and the ASX's computer glitch also contributed to the lunch time plunge.

Costello was also making reassuring noises on The World Today two hours earlier, but in the process told this brazen porky about Federal debt:

PETER COSTELLO: You've got to bear in mind there's a lot of borrowing going on in the private sector, and huge borrowing going on by state governments...Now it won't affect the Commonwealth, because the Commonwealth doesn't borrow. The Commonwealth's actually saving money, and I think we could all agree now that it's very important that it's been doing that. Imagine if the Commonwealth were in the market borrowing at this time too.

So what exactly does Costello call the federal government's $5.1 billion 2007-08 borrowing program?

The Feds actually issued $400 million of new five year bonds on Tuesday and there will be another $400 million tender on August 28 which will be more expensive than before the global credit crunch. Then we've got another $800 million issue on 11 September, followed by $600 million on 25 September.

Whilst the Reserve Bank is in reasonable shape, it would be far stronger if Costello hadn't drained $25 billion in dividends out of it to boost his over-stated surpluses for the past 11 years. The same applies to the $30 billion blowout in unfunded federal superannuation on his watch.

The Australian dollar at one stage plunged US4c to almost reach US78c in overnight trading – but the Reserve Bank wasn't in there supporting it, partly because it doesn't have anything like the foreign reserves enjoyed by most of our Asian competitors.

The other interesting government arm in this equation is the Future Fund, which finally started deploying some of its $40 billion in cash back in June. In a similar scenario to the situation faced by all those Australians who ploughed into super before 30 June, let's hope the Future Fund still had most of its money in cash after the All Ords plunged by more than 15% from its recent high through until lunch time yesterday.

Given the plunging dollar, let's also hope any foreign investments made by the Future Fund were unhedged. Maybe it's time the Future Fund came out and disclosed its position to the current and past public servants whose money they are managing.

How Singapore owns more of Australia than our own government

By Stephen Mayne in Crikey on 2 May 2007

Peter Costello was busy showing Lee Kuan Yew around Parliament a few weeks back when the Singapore strongman was in town to pick up an honorary doctorate from ANU. The citation, perhaps, should have read: "For building the first sovereign state to own more Australian business assets than the Australian Government itself."

Since coming to office, Peter Costello and John Howard have flogged off almost everything that wasn't bolted down, including the Defence Department headquarters at Russell Hill, something you can't imagine the Americans doing with the Pentagon.

Here's a list of the residual operating assets held by the Australian Government:
-17% stake in Telstra: $9.6 billion
-Australia Post: $5 billion
-Medibank Private: $1 billion
-Australian Submarine Corp: $200 million
-Total: $15.8 billion

Sure, there's $40 billion in cash sitting in the Future Fund, but this money ultimately belongs to the public servants who are owed the $100 billion in unfunded superannuation liabilities. The Future Fund is nothing like the Singapore Government's almighty Temasek Holdings, which has a controlling stake in the various companies that now control more than $22 billion worth of Australian assets.

Wikipedia has a comprehensive summary of Temasek and the Temasek annual review is also well worth a read. The description of their international investments doesn't even mention Australia and reads as follows:

Our international investments include blue chips in India such as ICICI Bank, Mahindra & Mahindra and the Apollo Hospital group; China Construction Bank and China COSCO Holdings in China; Bank Danamon and Bank Internasional Indonesia in Indonesia; Quintiles Transnational Corp in the USA; as well as Hana Bank in South Korea.

This is because most of the Australian investments have been done through Singapore Telecommunications and Singapore Power, rather than Temasek itself.

Here's a list of Australian commercial assets controlled by the Singapore Government:

• Optus: $10 billion
• Alinta energy assets: $4.3 billion
• Victorian electricity transmission monopoly: $2 billion
• Old Texas Utilities Australian portfolio: $5.5 billion
• Property: $2 billion
• Australand stake: $1 billion
• Total: $22.8 billion

The Singaporeans prefer to play down the scale of their Australian assets, but this little country of 4 million people has left us for dead when it comes to national savings and global investments. It will be interesting to hear what Peter Costello and John Howard say when the question is put to them about the Government's residual commercial assets being less than those held by Singapore.

Maybe Peter Costello should have offered Medibank Private directly to Lee Kuan Yew when he dropped by.

* This argument was expanded upon in this article in The Sunday Age on July 22, 2007.