Queensland Treasurer Cameron Dick has soared to previously unattained heights of state budget creative accounting, and I must admit I’m rather impressed by the cleverness of it all, while at the same time being appalled the Treasury would let him get away with it. For instance, I’m struggling to understand how any competent senior Queensland Treasury official could have cleared for publication such a completely nonsensical passage as this one found in the 2021-22 state budget handed down today (p. 69 of Budget Paper 2):
Separate to the contribution to the DRF [Debt Retirement Fund], the government is retaining approximately $1.8 billion from the transfer of the Titles Registry to support a number of long-term government priorities, including the establishment of the $1 billion Housing Investment Fund, the $300 million Path to Treaty Fund and a $500 million Carbon Reduction Investment Fund.
The Government claims it has an additional $1.8 billion to play with because the Titles Registry is now worth so much more than it originally expected and it can “retain” part of the revaluation for its budget. When it was initially planning its Debt Retirement Fund, the Government thought the Fund would be worth $5.7 billion, with $4 billion coming from the Titles Registry. But now the Titles Registry appears to be worth $7.8 billion. Adding in $1.5 billion from Defined Benefit Super assets (previously only $1 billion was coming from here) and $200 million in other assets, the value of the Fund would now end up at $9.5 billion, but the Government has decided to “retain” $1.8 billion from the Titles Registry transfer, so only $6 billion of the Titles Registry is going into the Fund, which will now be worth $7.7 billion in total at the end of the financial year. Completely confusing isn’t it? This is a good sign the Government is up to something fishy!
Since last year, the Titles Registry, which looks after land title searches and registrations in Queensland, has conveniently increased in value from around $4 billion to what appears to be $7.8 billion (with, as noted above, $6 billion of it going into the DRF and $1.8 billion “retained” by the Government), even though this seems totally absurd. It is now worth more than Bank of Queensland, which has a current market capitalisation of $5.62 billion, according to the ASX. Let’s hope the Government publicly releases whatever valuations it has received for public scrutiny.
The Government is pretending it is creating $1.8 billion in additional cash for the budget simply by transferring the deed or whatever the relevant paperwork is for the Titles Registry to its asset manager QIC, to go into the pointless Debt Retirement Fund. Incidentally, I doubt the Debt Retirement Fund (part of the larger fanciful Queensland Future Fund) will fool the rating agencies into thinking Queensland’s debt is lower than it is as the Government intends (see my submission to the Queensland Future Fund Bill inquiry). To claim that it is retaining $1.8 billion from a transfer of paper to its asset manager QIC, a transfer which does not generate any new cash for the government, is absurd. The Government is not selling the Titles Registry, even to QIC, so how is new cash being generated to fund the initiatives indicated?
What may be happening is that the Government has instructed QIC to pay it, from its Debt Retirement Fund, $1.8 billion in cash, which is roughly the amount of liquid assets it claims it is putting into the Fund (i.e. $1.5 billion in funds out of the Defined Benefit super scheme assets and $206 million in securities). QIC may simply be selling those assets for cash on the Government’s behalf and letting it withdraw the money. This helps the Government reduce its overall debt level because this cash can make a contribution to financing its deficits. The additional cash the Government has to play with appears to be coming from the liquidation of financial assets including $1.5 billion set aside to meet the Defined Benefits super liability. I’m unsure if this is exactly what is going on because the Government has provided so little information in the budget on this clever scheme. But, given the level of creativity on show, there is no doubt something dubious is occurring.
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