Mrs DRAPER (10:04 AM) —It is with great pleasure that I rise to speak on the Financial Management Legislation Amendment Bill 1999 . I am also very pleased that the opposition supports this bill, and I thank the member for Melbourne for his comments.

Mr Slipper —And for his book, too.

Mrs DRAPER —Absolutely. On 21 February 1996 the then finance minister, now Leader of the Opposition, declared that the budget was foreshadowed to be in surplus. Twelve days later the Department of the Treasury presented figures to the incoming government which showed that the nation was headed for a multibillion dollar deficit.

To ensure that such a monstrous deception could never be practised upon the Australian people again, this government enacted the charter of budget honesty requiring that updated budget estimates be released before every federal election. At the same time, we established a Commission of Audit to look into the range of issues relating to the preparation of the national accounts and improving the efficiency of the public sector.

The Commission of Audit, in its report of June 1996, recommended that moving to a full accrual accounting framework was essential in meeting the requirements of the charter of budget honesty. In other words, if the government is to keep faith with the Australian people in a way that the previous government did not, accrual accounting is an essential part of this.

This bill seeks to amend the Financial Management and Accountability Act 1997 to change the underlying basis of accounting from a cash to an accrual basis. The Financial Management and Accountability Act was initiated by the previous government and was predicated on a cash based accounting system. This must now be changed to bring it into line with the government's reforms in this area. Businesses—and certainly large businesses—do not manage their affairs on a cash basis. If they did, they would be likely to go broke fairly quickly. Managing their affairs on this basis, they would have no measure of future liabilities, no measure of the extent to which assets were depreciating and no proper measure of expenses which had been prepaid but not yet incurred. Yet this is how governments have been expected to manage until recently. In doing so, they experienced exactly the same sorts of problems. Drains on future funds were not accounted for, the practice of hollow logging, in which assets are starved of resources, could be carried on without being reflected in the financial statements, and assets could be sold with the proceeds going into the current year's revenue, a practice which was rife during the opposition leader's period as Minister for Finance.

These practices will become a thing of the past with the adoption of accrual accounting in the preparation of our financial statements. No longer will governments be rewarded for bad economic management; no longer will it be possible for governments such as the previous Labor government to run down assets and run up liabilities while pretending—there is that word again—that they are managing the economy responsibly. Many times in the past an opposition has attacked the incumbent government for its failure to be transparent in the presentation of its accounts, only to indulge in the same practice when in government.

We are the first party to make our concerns known when in opposition and then make good on our commitments on coming into government. Furthermore this legislation, combined with our charter of budget honesty, commits all future federal governments to the same level of honesty and accountability. Should there ever be another Labor government at some stage in the future—

Mr Ian Macfarlane —Oh, not for a long time.

Mrs DRAPER —they would have nowhere to hide fudged budget figures. Indeed, it is a pity that Labor did not introduce accrual accounting when it came to office in 1983. It would then not have been able to hide so many of the asset sales that went straight to fund recurrent expenditure.

Knowledge is power; by giving people knowledge about the true state of the government's finances this is a very empowering bill. Public sector departments will be much more able to plan expenditure, foresee difficulties and avoid them, and direct resources to where they will be needed in the future. This means that every sector of government will be more efficient and therefore better able to deliver the services that people need.

It is important to note that this does not mean that departments cannot allocate—or hypothecate, to use the correct term—funds for particular programs or activities. It simply requires that this all be done in the context of accrual accounting. Without this bill, funds must be drawn from consolidated revenue and placed in outside funds so that they can be used for their purpose. This bill enables them to be allocated to specific funds within the accrual accounting framework. This bill is important not just for itself but for all of the activities and programs that it facilitates.

I said before that, thanks to this bill, public sector departments will be much better equipped to plan expenditure and direct resources to where they will be needed in the future. This, of course, is the whole point of responsible financial management: it enables us to allocate resources to the social programs which need them most. I commend the bill to the House.