Yesterday I heard Mitch Fifield being interviewed on ABC radio. Listen from the 2.01 hour mark for the interview. At 2.09.36 mark we have this exchange:
Epstein: That’s the same thing as saying it’s Labor’s fault you broke your promise.
Fifield: No. What it is, is that in government we discovered that what the Labor Party was saying about the costs of the project were wrong. They didn’t have a handle on the costs and we saw a bit of that in the papers today where Labor’s fibre to the premise approach, in some cases saw the expense of doing that being $91 thousand for just one premise. …
Okay – I’m happy to accept the argument that Fifield is making. The last Labor government was useless with money.
Mr Rudd also says one of his greatest regrets is appointing Mr Swan treasurer over the more able Lindsay Tanner. He argues Mr Swan was intellectually not up to the job, was a poor communicator and his parliamentary performances were an embarrassment. But not appointing him would have risked destabilising the party.
But there are two problems with his argument as I see it.
- The Charter of Budget Honesty was supposed to prevent these sorts of surprises from occurring. A quick search of the 2013 PEFO find no warnings to the incoming government or electorate that the NBN was the black hole that it became. All that I can see is that the former government had a $4.8 billion poison pill to prevent the NBN agreement from being terminated (and that really relates to paying out the direct expenses).
- If the project was such a dog as the government are now claiming, why did they proceed with it? Even on a cheaper model that reduced what had initially been promised it seems that the government (read taxpayers) would have been better off paying the $4.8 billion and walking away. A good principle of capital budgeting is to ignore sunk costs and don’t throw good money after bad.
I suspect the government – like its predecessor – doesn’t want to realise the loss on the NBN as it will then come onto the budget. These sorts of Enronesque accounting practices are frowned upon, if not actually illegal, in the private sector; so it isn’t clear to me why they should be legal in the public sector. I also think politicians promoting dud businesses should be subject to the same penalties as private citizens promoting dud businesses.