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Apparently search and rescue activity offshore the NT

Henry Ergas on the Rudd/Gillard governments NBN financial subterfuge

It's very hard to read Henry's piece in the Oz today without forming the view that considerable subterfuge was employed by the Gillard/Rudd governments in financing their folly, the NBN.

Here's a link to Henry's lengthy piece published in today's The Australian - well worth a visit to the paper shop.

Albanese coffs harbour

Coffs Harbour, July 4, 2013. Beaming with pride, deputy prime minister Anthony Albanese pushes a big yellow button. "Done," he exclaims: Coffs Harbour is on the National Broadband Network. Thanks to "the greatest nation-building program in Australia's history", Labor has propelled one more electorate into the digital age.

But (it was) a sham. The building isn't connected to the NBN; only Telstra's copper wire links the big yellow button to the outside world.

Had Albanese been a company director, the stunt could have landed (him) in jail. But he is above all that. And like a recurring nightmare, the disasters keep coming: from subs and the NBN to pink batts and school halls, governments seem unable to deliver.

Henry writes about the Collins Class submarines, the NBN and other government catastrophes.   I've focussed on his comments about the NBN - but it really is worth getting the Oz today for the whole column.

In commercial markets troubled projects are either fixed or terminated; but in the public sector, it is only good programs that die young, as governments, faced with projects in difficulty, throw good money after bad in a desperate attempt to avoid recognising defeat.

In the case of the NBN, for example, the government apparently knew from a report it had commissioned that it was likely to accumulate very substantial losses. However, by keeping that report in draft form, it was able to refuse its disclosure. And as they were sitting on that advice, Stephen Conroy, the then minister for communications, echoed by Penny Wong, the finance minister, assured parliament that "this is a project which returns all of the government's money and interest costs".

But it was not only parliament that was potentially being misled. The value of the assets on the government's balance sheet must be confirmed by the Auditor-General; and public sector accounting standards specify that when it becomes "reasonably likely" that an asset will not provide "a pre-tax rate of return that reflects current assessments of risk", the shortfall must be "recognised immediately".

If the assessments available to the government are taken seriously, the assets committed to the NBN should have been written down to zero as they were being acquired and a net liability registered. However, the budget treatment of the equity injected in NBN Co suggests the project would more likely than not break even or come close to it. It is difficult to believe that conclusion could properly have been reached had the Auditor-General been fully briefed on the project's financial prospects.

None of that is to say cover-ups are the only response when programs such as these run into trouble. Rather, further mechanisms kick in that often make matters worse.

Perhaps the most common is the escalation of commitment to what would seem to be a deeply flawed course of action. As government circles the wagons, goal displacement sets in: what was a means becomes an end, cementing the support of the constituencies that are the project's major beneficiaries.

The NBN again provides a textbook case. Deploying fibre-optic cable should be one way among others of providing very high-speed broadband, not an objective in itself; but the greater the obstacles the project encountered, the more strident became the government's emphasis on fibre as the magic cure.

This was not a case of the tail wagging the dog; rather, the tail had reshaped the dog's breed, altered its appetite and dominated the lives of its owners. And ultimately, in Conroy's theatre of the absurd, the tail completely swallowed the dog, leaving the farce of the big yellow button as the only action that mattered.

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