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Opportunity Lost

By Canfan 5 June 2014 27

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Canberrans will be forced to pay for $4.5 billion in debt and nearly a billion dollars in interest all so Shane Rattenbury can build light rail and Simon Corbell can build solar farms, Opposition Leader Jeremy Hanson said today.

“Tuesday’s budget was a continuation of the failures dished out over the past 13 long years. The extensive debt and deficit that Andrew Barr uses as throwaway lines are signs the government cannot show restraint in funding its pet projects that Canberrans do not want and cannot afford,” Mr Hanson said.

“Debt will rise to $4.5 billion while interest will reach nearly a $1 billion over the forward estimates. Rates will rise by 10 percent annually costing households hundreds of dollars more each year. But Andrew Barr and Simon Corbell don’t care as long as they can reach a 90 percent renewable energy target and build a multi- billion dollar tram network.

“ACT Labor is causing Canberra to lose its way but the Canberra Liberals will bring the opportunity back. I want Canberra to be the best place for everyone to raise a family, make a living and get ahead. I want to build economic prosperity, make home ownership attainable and make our health system the best in Australia.

“Canberra is the best city in Australia and Canberrans deserve better. The Canberra Liberals will fight every day for what Canberrans want and not what ACT Labor thinks they need,” Mr Hanson concluded.

(Media Release Jeremy Hanson)

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Opportunity Lost
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VYBerlinaV8_is_back 2:27 pm 10 Jun 14

rommeldog56 said :

patrick_keogh said :

Well I think you can make an argument one way or the other about whether we should have done these projects and done them now. Of course the wisdom that comes from hindsight is a wonderful thing but I know a lot of ratepayers at the time thought that improved water security was worth spending money on. That believe will almost certainly come back in the next drought.

Given the decision to go ahead with these projects it makes sense for the ACT government to do the borrowing, given that the territory’s AAA credit rating means that the cost of money is lower to the government than to commercial organisations.

Calculating the NPV of these assets is tricky, because it is hard to factor in the risk of running out of water: you’d rely on elastic pricing models (as the level of the dams fall the price rises) or similar together with some modelling on the demand side (population increase etc.). So working out whether this is worth the $250M p.a. would require information I don’t have.

Well, in relation to the expansion of the Cotter dam – it probably should have been done – whether the cost blow out was justified or not is another matter.

Water security is good – water is used by everyone – as opposed to the toy train set.

Its hard to think how the ACT Government can ever drop below at least a AA rating though – I’m sure that the ratings agencies would take into account the fact that the ACT Government can and will repay their debt.

After all, they only need to further increase Annual Rates and other Government charges to pay it off.

It’s easy.

A commercial organisation usually does not have that luxuary.

The ACT government would also be backed, to a degree, by the federal government, who are the only party who can issue Australian dollars. Australia is not in the same situation as many European countries who cannot issue their own currency any more.

Of course there is a limit to how far printing money can go to solving a problem, but for short term problems it would likely be quite effective, if for no other reason than the debt becomes deflated as interest rates catch up.

rommeldog56 1:24 pm 10 Jun 14

patrick_keogh said :

Well I think you can make an argument one way or the other about whether we should have done these projects and done them now. Of course the wisdom that comes from hindsight is a wonderful thing but I know a lot of ratepayers at the time thought that improved water security was worth spending money on. That believe will almost certainly come back in the next drought.

Given the decision to go ahead with these projects it makes sense for the ACT government to do the borrowing, given that the territory’s AAA credit rating means that the cost of money is lower to the government than to commercial organisations.

Calculating the NPV of these assets is tricky, because it is hard to factor in the risk of running out of water: you’d rely on elastic pricing models (as the level of the dams fall the price rises) or similar together with some modelling on the demand side (population increase etc.). So working out whether this is worth the $250M p.a. would require information I don’t have.

Well, in relation to the expansion of the Cotter dam – it probably should have been done – whether the cost blow out was justified or not is another matter. Water security is good – water is used by everyone – as opposed to the toy train set.

Its hard to think how the ACT Government can ever drop below at least a AA rating though – I’m sure that the ratings agencies would take into account the fact that the ACT Government can and will repay their debt. After all, they only need to further increase Annual Rates and other Government charges to pay it off. It’s easy. A commercial organisation usually does not have that luxuary.

VYBerlinaV8_is_back 1:12 pm 10 Jun 14

patrick_keogh said :

Well I think you can make an argument one way or the other about whether we should have done these projects and done them now. Of course the wisdom that comes from hindsight is a wonderful thing but I know a lot of ratepayers at the time thought that improved water security was worth spending money on. That believe will almost certainly come back in the next drought.

Given the decision to go ahead with these projects it makes sense for the ACT government to do the borrowing, given that the territory’s AAA credit rating means that the cost of money is lower to the government than to commercial organisations.

Calculating the NPV of these assets is tricky, because it is hard to factor in the risk of running out of water: you’d rely on elastic pricing models (as the level of the dams fall the price rises) or similar together with some modelling on the demand side (population increase etc.). So working out whether this is worth the $250M p.a. would require information I don’t have.

I don’t think too many people would have a problem with spending on infrastructure like water capture, storage and processing, because it has a clear and ongoing benefit (provided the money was spent reasonably efficiently).

patrick_keogh 12:31 pm 10 Jun 14

Well I think you can make an argument one way or the other about whether we should have done these projects and done them now. Of course the wisdom that comes from hindsight is a wonderful thing but I know a lot of ratepayers at the time thought that improved water security was worth spending money on. That believe will almost certainly come back in the next drought.

Given the decision to go ahead with these projects it makes sense for the ACT government to do the borrowing, given that the territory’s AAA credit rating means that the cost of money is lower to the government than to commercial organisations.

Calculating the NPV of these assets is tricky, because it is hard to factor in the risk of running out of water: you’d rely on elastic pricing models (as the level of the dams fall the price rises) or similar together with some modelling on the demand side (population increase etc.). So working out whether this is worth the $250M p.a. would require information I don’t have.

dungfungus 11:07 am 10 Jun 14

patrick_keogh said :

gazket said :

It seems 1/2 the $4.5 billion borrowed money will be paying for ACTEW debt.

I haven’t looked into it so perhaps someone can inform me… I’m aware of a couple of large capital projects that ACTEW has completed (or are nearing completion), namely the Googong pipeline and the Cotter dam expansion. Is this where this $4.5 billion in debt comes from?

The article in Monday’s CT doesn’t give much detail but it said most of ACTEW’s borrowings in recent years were to fund the projects you referred to. A figure of $1.4 billion is suggested.
What is revealing is that interest payments are around $250 million a year yet the ACT Government still takes 100% of the dividends from ACTEW first.
To me this is tantamount to a public company using borrowed money to pay dividends to the shareholders which is not sustainable. Meanwhile, the debt grows and we ratepayers are exposed to the debt.
Perhaps they are deliberately gearing ACTEW’S borrowings so high that it will be unsaleable and the huge salaries of the chosen few will be preserved.

patrick_keogh 9:47 am 10 Jun 14

gazket said :

It seems 1/2 the $4.5 billion borrowed money will be paying for ACTEW debt.

I haven’t looked into it so perhaps someone can inform me… I’m aware of a couple of large capital projects that ACTEW has completed (or are nearing completion), namely the Googong pipeline and the Cotter dam expansion. Is this where this $4.5 billion in debt comes from?

dungfungus 10:32 pm 09 Jun 14

gazket said :

It seems 1/2 the $4.5 billion borrowed money will be paying for ACTEW debt. Looks like ACTEW couldn’t run a bath without letting it overflow.

Remember how ACTEW used to sponsor every sporting team and causes like the home for homeless homing pigeons?
Well, soon ACT ratepayers will be sponsoring ACTEW.

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