Senate Economics Legislation Committee, , 5:43:24 to 6:05:16
The committee discusses HECS revaluations, the costing of the home battery scheme, and significant budget variations.
Topics: Education, Electricity grid, Government spending
Speakers: Hon Matthew Canavan, Hon Katy Gallagher, Damien White, Philip Brown, Unknown Speaker, Lisa Darmanin
>> Yeah, look, I I might just ask a couple of follow-up questions here. I'm sure you've probably seen the article in the Australian Financial Review today just on Senator Sharma's question. Someone is quoted in that article as saying, "This is a [clears throat] real problem and could see AOFM taken advantage of by experienced bankers." Uh, has the Treasury put in any uh any any uh uh contingencies here to avoid this happening uh given the uh turmoil we're seeing in our uh unit that is responsible for selling a trillion
the secretary said this morning, we've set up a review of the AOFM led by uh Guy Deell. Um we haven't done anything separate to that. Um in terms of issuing bonds in a regular basis, it's a well uh a well practiced uh process. It's done at least a couple of times a week basically at the moment. um uh it doesn't seem to me and as I said and the results seem to suggest that we are getting bonds issued at the sorts of rates that we would expect given what's in the market.
>> I did go through with Senator Sharma as well as well but we did go through before that yields on Australian government debt have increased considerably higher than other countries in the past few months. We did have the situation of A&Z being banned from uh uh doing deals on on government debt because they acted unconscionably. There's clearly a risk here. Uh the corporate sector is pretty savvy uh if we're not careful. Uh so the only thing you've done is the review.
>> So Senator, the A&Z thing was several years ago.
>> But they were banned last year, weren't they?
>> Uh no. Well, no. Well, >> yes.
>> Well, I can't remember exactly when
last year.
>> Yes. But the event happened, I think, in 2023. Um, as I said, I don't think that there's any any indication that the yield change in yields on government bonds has anything to do with AOFM.
>> No, I think it's more to do with out of control government spending, but um uh still there's clearly a risk. Is the Debell review looking at the appointment process for uh the head of the AFM? Miss Hughes is it? >> this article. Yep.
>> Yeah. No, Muse is the M Hughes is the AFM CEO, but no, we're not looking at the appointment process. We're looking at the the ability basically the ability of the AFM to do its job to issue bonds at at a cost-effective rate, managing risk. Well, too,
>> this article claims that a person who spoke to the head hunter at the time of the appointment uh was told that the preference is for a woman uh candidate and uh because presumably it was a male, it was he uh when he asked whether it was worth him applying. Was there instructions given to the head hunter that a preference should be for a woman to lead the agency?
>> I have no knowledge of the appointment process, Senator.
>> Well, could you take that on notice?
>> Uh yes, Senator.
>> Thank you. Um uh okay obviously ask questions of them later. Um uh uh now I wanted to go to a table in my EO uh on page 81 table 3.13 if you are able to help help me out on this one. uh uh I'm particularly interested in the line program specific par parameter variations uh that is showing a deterioration of somewhat amazing 7.5 billion this financial year. Can you just explain I've never really focused on this particular line item but can you explain a bit what that is? What is program specific parameter variations?
>> Uh I can but first I might explain to you the table. So this table is about a it's an acrruelbased table doing expenses. So it's not a table that feeds directly into the underlying cash balance that we use. So it's it's on the acrruel side of the budget rather than the cash flow side.
>> Sure.
>> Parameter specific variations are effectively all the things that are not counted in the rest of the table. Right? So if you think about so we have things that affect payments. So um we can have economic parameters like inflation, employment and those sorts of things. Um but program specific parameters about those specific things that affect various payment programs. Now I don't have I don't know if I have one in my head but like I don't know if we're thinking about health is it's like you know more people turn up to doctors.
>> I've got a few but yeah okay
>> but it's it's those sorts of things. It's things that are not that are specific to programs that are not like broader whole of economy type programs.
It just struck me the reason I say I haven't particularly focused on this line item before but uh >> this is I think over 6 months >> and
my understanding is this is the hex 20% cut moving
>> 17425
into 2526
>> is that how much is the hex >> component of the 17 billion
the figure but it's a large component
So when you compare this table, Senator, so table 313 to table 3.2 earlier on um which admittedly doesn't break it down into all these components. Um that table 3.2 shows the parameter variations on payments that flow through um to our underlying cash balance. the total number. So the equivalent to the 23 billion of the bottle of table 23 3.13 is 7 billion just over 7 billion $7.3 billion
>> still a lot of money.
>> So the gap between 7.3 and 23 is effectively those things that for the for that year are recognized as increased in expenses like the hex thing but which do not have an impact on cash flows there and then they might have an impact on cash flows later down the track could be the next few years. It could be a long time into the future. So it's things where something happens that affects the amount of uh well effects like assets or liabilities we have now their value. So hex is one. There's also some things around when actuaries come and revalue things sometimes like in the NDIS or veterans payments. Those things will change the number a large amount in the first year and they might gradually flow through to the cash numbers later. So you often get big numbers in this table of 313. Senator,
>> have we got a number for the hex? Uh
it's about $10 billion,
>> right? Okay. So that does still leave that's the seven billion then in the other table roughly.
>> Uh so 10 plus 7 is like a bit over 17. So we probably have a few billion extra of other things in
>> but I'm just I'm just focusing on the line. I think that's 17. Oh yeah. So we >> part of the just to be clear. Is a hex part of the 17?
>> Yeah. Hex part of the 17. Yes. Okay.
>> Um okay. So okay. What's the other seven? That's still it's huge. Like I've never seen anything like this when I look back at other so other budgets. Gone back and have a look.
>> It's the um it's the other variations that are um referred to in the parts of my effort that talk about cash um changes. So things like the cheaper home batteries program.
>> How much is that one?
>> Um I think that that is in the order of um uh possibly Oh, I can't I can't remember. Let I can find that in the document.
>> Okay. if you could while you do that.
>> And there's some um liabilities for military compensation and veterans benefits. >> Um but I think they're the big moving pieces. >> Those three,
>> right?
>> But we can come back on that, I think.
>> I'm just I mean this is in 6 months. I mean, how could you get say that I wanted to ask about the battery scan? >> What was that costed at in PIFO?
>> I think it was >> for this financial year. Oh. I don't want to.
>> So, Senator
>> Exactly.
>> So, for things where a liability or an asset is revalued. So, the things like the hex.
>> Okay. Now, can we come back to the battery? I asked I didn't ask about the hex.
>> No, no. You were saying about why it could be big in 6 months or 8 months.
>> No, no, no. My question just then was what my question was very direct. How much was the battery scheme costed [clears throat] in peace?
>> So, Mr. White was trying to answer an earlier point and then you moved on. So,
okay. So the the the variation in 2526 on batteries is $3.4 billion.
>> How much was it meant to be in in >> I How much is it this year? How much is
happy to take that on notice.
>> Yeah. How could you get it wrong?
>> It was very very popular.
>> But you got it wrong by hang on hang on hang on. They're your estimates treasur finance minister. You got your figures wrong on one program to the tune of $3 and a half billion dollars.
>> Well, the uptake
>> whether it's popular or not, you take
was much higher than was forecast. You are correct. And obviously all they're because you couldn't get your figures on their house withion costs including half billion including in large numbers of rural communities and regional >> you could your figures. It's your
budget. gone wrong by $3.5 billion,
>> which is why we've made some changes to that program because it it turned out
>> because you stuffed it up.
>> No, [laughter] no, there wasn't. There wasn't.
>> You haven't controlled your budget. It's blown out.
>> We have supported a program that Australians have embraced in much greater and faster numbers than was anticipated.
>> Okay.
>> Changes to manage that to manage that
demand. That error, that six-month error is half the 7 billion. What's the next
>> Um, Sarah, I'm having to take on notice more detail. This is probably finances.
>> Are you going back cuz this is a bit of a pattern the last few years. Uh, when I've looked at this now, this particular row or line item, it's hit massive records in the past two years. Now I see over 50 billion here across the fords. Uh there were two other years in the previous budget year which was over $30 billion variations and then before that and the AFR did some good work on this too. Before there was hardly any changes indeed they used to be used to overestimate largely. Uh so is there any analysis or investigation going on about how these errors they are errors they're estimates you make an estimate of a program >> variations on estimates well you you use whatever
>> well that's what they call variation
>> you can use whatever whatever cover up
you'd like but they're covered a
>> canavan and how have you got the figures so wrong so is there any investigation
>> cover up if you're asking about it based on numbers that you're given
The way you're describing it is the cover up. Finance Minister, is there any investigation occurring about how you got these figures that wrong?
Uh that's a matter for the department of finance essentially on how it's your
responsibility
>> and so uh yes I can confirm we are looking at programs where we see and we have been I mean the NDIS was you know when you go back and say you go back over a number of years that when we came to government was having massive estimates variations we're trying to moderate that and in a number of other areas where we are seeing big growth yes as you would expect the department of finance to be looking at them and I can confirm than we are
>> right. Okay. The problem here is how can anyone believe the figures in my EO if they're going to be out to the tune of in this budget 50 odd billion as I said last financial year in both my EO and the budget 30 billion that is a bit of a problem for going back to how the markets are viewing this government's fiscal strategy and how it's flowing through to yields it's hard to believe the figures in the reports because they end up being varied if you want to use that term within months >> what's happened What's
>> I can rotate the call and come back.
>> Can I just have one more? That's okay. >> I I'm also interested. We've I've just focused on the fifth 25 to 26, but >> the the next three years over the fords all have variations or use the minister's term variations of $10 billion. >> What's why is why are those figures out by that much?
>> We have to take that on notice, Senator. We don't have a breakdown of what's in that line.
>> Haven't you looked at this? This is $30 billion of cost blowout.
>> Senator, um the the I might just point you to page 67 of the my info document which explains them on a cash basis, noting that table that you're looking at is on a cruel basis, but that is the part of the document that explains on a cash basis the significant variations in
>> and for the rest of those years, the cash basis is closer to the acrruel basis. So those numbers will probably explain the vast bulk of it.
>> Okay. Well, take me through them. What
is it? Well, they're there and they're
>> I kind of want to know it on a year, but I don't quite understand why you don't know it off because it's a $30 billion >> in 6 months for those three years.
>> We're saying
>> and you're not across it. You're not like, okay, what went wrong there? $30 billion.
>> Well,
>> I'm worried about this government. I mean, you should be across the finance minister because >> I mean, how are you managing this budget even asked questions about what happened to $30 billion.
>> You're all the main stars of your own videos. Is that what you want? You want to build this? You know, like
>> what?
>> What the hell are you talking about? >> I'm talking about $30 billion and you're
What are you talking about?
>> You don't know. It's your budget and you don't know where $30 billion went. Is it under the couch? Is it I mean, is it behind the TV? Where is the $30 billion?
I will senator as we kept trying to say as you were doing your speech to the parliament >> on page 67 it takes you through
>> it doesn't add up those figures on a yearly basis annual basis like I asked
>> no we would have to take that on notice but this
>> which officials have already agreed to do
>> before my point is why you minister don't understand where $30 billion went missing >> you you I mean if I was reading but that's one of when I read my I was like
where was
You didn't ask those questions. You
don't seem to be across your own budget. >> Well, I don't know where you were when we released my EPO, but I spoke about this at length.
>> Well, you obviously the
>> Okay. And the explanation is there on page 67. It talks you through the major movements, whether it be disaster um events, whether it be some of the arrangements around age p you go through it. child care, NDIS, support for seniors, the GST payments. I mean, it is all there for you. There is, you know, I
don't know what you don't understand about that. >> Those in those dot points there, are they all do they all relate to that line that I was mentioning >> or are they for various variations >> Cuz I'm I'm asking about the 30 billion in that line. I didn't know. >> So it's a bit unclear to me because that that >> when I read this that that list of dot points says major increases in payments from parameter and other variations. >> So is it only for that line?
>> Some of them will be in that line center. Some others may some others may be in some of the other lines in there. But as I said >> this does this will have other things where they are not where they not have a cash effect. We can this these page 67 things explain the biggest movements in cash payments over the course of the forward estimates. Um and they explain the 30 uh what number was that? They explain the line in table 3.2 on page 56 that talks about $35 billion of parameter variations to in the main and most of those things will be the same things that cause the big movements in your table that you are talking about. granted not all in that one line you're talking about but across the lines and there will be other things like hex and things like actraal evaluations of things like veterans benefits
>> what's clear is the government has just lost control of its fiscal strategy
Senator Senator Canavan so you wouldn't pay for disaster events is that right >> well I wouldn't allow I would hope that if I finance minister I wouldn't
program. That's the battery. >> That is what you're saying in one six >> You think that paying I think you should I think you should both resign. If you made a10 billion error in a public company, you'd be out the door. You'd be
out the door. 10 billion error on Australians with H pension. You don't want Australian.
>> If I were in your shoes, I would be holding myself to account, which you are
not. You're making excuses when you have
wasted when you have totally missed 10 billion on one program.
>> Elderly Australians and those in disaster affected communities would like
>> Well, I'd like an expl how you got one program wrongion and you continue to distract from that
age.
>> Can we please just stop talking over the top of each other? Do you have any more questions, Senator Canavan? All right, I'm going to rotate the call.
>> Can I just have my >> You're getting all the answers. They just don't fit with what you think Senate Senator Canavan or what you want to think.
>> Okay. Senator O'Neal, you have a point.
>> So, I I do have a point of order and I stopped asking for it because the escalation that happened was entirely predictable because the standing orders that you read this morning were not respected. You clearly identified and perhaps Senator Canavan wasn't here to hear these words, dignity, courtesy, fairness, and respect. And the way in which that questioning or attack was undertaken then was hardly This might be okay for a year n boy in the playground
and you're giving me a NOT OKAY
JUST TALK OVER ME. KEEP GOING. Keep talking over the women in this room. If that's how you were brought up that's a big fail.
>> Here we go.
>> Absolutely. So I couldn't even make my point of order without you speaking over the
>> topion of taxpayer money.
>> You're out of order >> and that's my point >> that Senator Canavan is out of order and at odds with the standing orders. >> chair? Um just to assist the committee uh for what Senator Canavan um is trying to portray as spending uh losing control of spending. I can go through the $35 billion in payment variations in my EPO and perhaps Senator Canavan can choose which ones he would prefer weren't funded. uh 6.3 billion for disaster events, three billion for Australians on the age pension, 2.3 billion in additional supports for government and non-government schools, 2.1 billion in additional payments for the defense force superanuation benefits, 2 billion in support for veterans, 2 billion in additional child care support flowing to families and 1.6 billion in additional financial support for Australian carers.
So which bit of that is less than half which bit of that would you not fund? Well, that is first my first point. Okay, I'm happy to answer the question. I'm happy minister put the question. Be happy to answer it. The first point to make is that I just added that in my head and it was less than 25 billion. So, it's less than half less than half your $50 billion mistake. Uh so, if it was only half 50 billion, maybe I'd be a little bit more accepting. But $50 billion error is should be grounds for any chief financial officer to be shown on the door. And so, that is a problem. The other point to make is the problem here is not what you're spending it on is that you're giving uh the Australian people, the Australian markets the wrong advice about how much you're going to spend. So within 6 months you announce a program like the battery program and within 6 months it's not $2 billion, it's $12 billion. That is a problem because the markets need to be able to trust what the figures are in the government's budget so that they can assess how much will inflation be when they borrow when they lend you money, how much they they think they'll get back. your community >> and so well you ask well don't ask me questions there minister I'm happy to come over on that side if you'd like but you you asked me the question so I'm going to answer it I'm going to answer it and so this is why we have the highest interest rates in the developed world right now because the markets clearly don't trust your numbers how would they be able to trust your numbers cuz they're wrong within 6 months and now and now Australian family Australian families are paying more for their interest as well because of your reckless spending and inability to provide figures that the market trust.
>> Well, no, I don't accept that. Keep asking me question. I don't accept that. And for your the purposes of your arithmetic, um I didn't include the $10 billion in extra GST, which also affects uh this line. Senator Canavan, would you also stop that from flowing to the states? Is that
>> is a GST a parameter? >> Is the GST that line that I mentioned?
>> So GST um well GST payments to the states appears in that line
>> in that $10 billion. It was out
>> GST was higher over the forward estimates by $10 billion Senator and we then have to pay that to the state.
>> This is a problem. Yeah.
>> Perhaps we should let you determine all these things.
>> Well, you're not doing a very good job. Anybody could do a better job. The Australian economy has never the
Treasury.
>> I mean, it's never been a worse time for Australians.
>> Senator Canavan. It has
>> I think don't
um banter that's going on. I think
that's exactly what you're doing and you
know you're doing it. You finished your line of questioning. I'd like to go to Senator Whitten um if I could now. So, thank you, Senator Whitten.