I was quoted in the Courier-Mail this morning regarding the $3.5 billion the Queensland Government has withdrawn from equity in its power businesses (see chart above) for the purposes of paying down debt (see Earnings grab quick debt fix, Pitt says):
Former Federal Treasury economist Gene Tunny warned the dividend raid would affect the value of the government-owned corporations, which could be an issue if a future government was one day given a mandate to sell assets.
The Government is withdrawing cash and loading up the energy businesses with debt. It is reducing the financial flexibility of the companies and is interfering with the business finance decisions that the companies should be making themselves. Would the companies have paid a huge special dividend to the Government if not instructed by the Government? I doubt it.
The equity raid is motivated by the Government’s political need to appear to be improving the State’s financial position through its Debt Action Plan. But, as I noted at Budget time in July, the Government is not really improving the State’s financial position at all (see my Budget day post). It is simply shifting money around on its balance sheet. To really improve the State’s financial position, it needs to start running surpluses (on its fiscal balance). The accounting tricks are not fooling anyone.