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Dawkins should resign over loan council cover-up



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DAWKINS SHOULD RESIGN OVER LOAN COUNCIL COVER-UP

The startling revelation last night by Treasurer Dawkins that he knew about the $1.2 billion blow-out in the Victorian Government's borrowings way back on 17 June 1992 raises very serious doubts about a Federal Government cover-up.

Mr Dawkins is in deep trouble over this issue and he should resign as Treasurer for his disastrous performance as Chairman of the Loan Council.

Further, there should be an independent inquiry and all the facts should be made public.

A careful reading of the Federal Government Budget Papers No 4 shows absolutely no reference to Victoria's blow-out.

Table 19 on page 65 shows that according to the Federal Government, Victoria's borrowings were $1394.3 million 1991-92 - which happens to have been exactly their "global" borrowings limit.

There are no qualifications in the table for the numbers on Victoria. And yet, the Budget was released in August - two full months after the Federal Government first knew about the $1.2 billion blow-out on - 17 June 1992.

Further, Mr Dawkins told us in his press release yesterday that:

‘In the period from June to September, this matter was the subject of an exchange of correspondence and a series of discussion between the Commonwealth and Victorian authorities.'

That is to say the Treasury and Mr Dawkins were in constant contact with the Victorians. They must have known what was going on and the extent of the economic incompetence in Victoria.

It is amazing that the Budget Papers completely failed to point out any problems. Indeed, they are completely misleading in saying that Victoria met its borrowing limit in 1991 -92 when it is apparent that both Mr Dawkins and the Treasury were fully aware that it did not.

Further, it is ridiculous for Mr Dawkins to simply have sat on his hands between June and October on this issue. As the country's senior economic manager, Mr Dawkins should have been raising alarm bells actively and publicly trying to get the Victorian Government to focus on its problem.

The breach should have been made public in the Budget Papers.

And, further, for Mr Dawkins to suggest in his press conference today that the Victorian borrowing blow-out was not a serious matter, but only a technical breach of Loan Council rules, is also ridiculous. He himself pointed out in his letter dated 10 September 1992 that the $1267 million was a breach of 1991-92 global limits and he said in his letter of 7 August 1992, that Victoria's borrowing should not have been undertaken without Loan Council approval and that the borrowing should have

involved a "special addition to Victoria's global limits."

For Mr Dawkins to say in his press conference that these were not "new" borrowings under Loan Council definitions is simply wrong!

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

Indeed, Mr Dawkins contradicts himself, and noted the seriousness of the issue, in the August letter by noting:

‘ You claim that the use of 30 to 60 day Treasury Bills issued by the Victorian Development Fund to finance budget deficits over the period 1989-90 to 1991-92 need not be counted against the global limits. If this operation did not involve any call whatsoever on private sector financial markets, then it is technically correct that the borrowings need not be counted against the global limits. However, your acknowledgment that the arrangements were becoming untenable, and the need to replace them with medium-term borrowings from the financial markets suggests that these arrangements were clearly increasing the level o f financial risk faced by the

Victorian public sector.’

Further, the Dawkins' claims that the details of the issue were made public by the Nicholls Report, "State Finance Victoria", on 21 September 1992 are completely spurious.

Certainly, the Report raised the issue but its comment (attached) hardly sets the alarm bells ringing. Indeed, it simply says the matter was:

‘...currently being negotiated with the Commonwealth government.’

This is an interesting conclusion given that we now know the Commonwealth had clearly determined by this date that Victoria had breached Loan Council rules.

Mr Dawkins has a lot of explaining to do.

Clearly, the Treasurer has to release all advice from Treasury and relevant documents on this issue. I have today applied under the Freedom of Information Act for those documents (see attached).

28 October 1992 Adelaide

Contact: Hugh Logue (06) 277 4030 D171/92

107

ο?ί % ε Ρ Γ W · ? .

, C h art 4.6

Victorian Budget Sector C urrent and Capital Account Outcomes

The budget sector has moved from current account surpluses and modest capital deficits to both current and capital account deficits.

Source: Department of Treasury working papers

Note: These figures are in nominal terms to illustrate the trend in budget outcomes

government borrowed $1,267.2 million through the Capital Works Authority. This was

associated with the refinancing o f existing debt, in particular, past short term borrowings through the Cash Management Account o f $276.6 million and $204.5 million undertaken in 1989-90 and 1990-91, and a further planned draw down o f $786.1 million provided for in the 1991­ 92 Budget Estimates. This refinancing does not represent any new or unplanned borrowings. Rather, it is part of an approved strategy for

repayment of previous C M A temporary borrowings involving a repayment profile of staged annual repayments over five years from 1994-95, when a current account surplus is planned.40

However, as only 'temporary' borrowings are exempt from global limits, the status of this medium term borrowing is currently being negotiated with the Commonwealth government.

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over the period.

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The current account deficits are funded from borrowings. In M ay 1992 the

V ic to ria n Government, Statement o f Budget Sector Transactions, M ay 1992, p 8. The government's financial strategy is outlined later in the chapter.

Deputy Leader of the Opposition

28 October 1992

Hon John Dawkins MP Treasurer Parliament House CANBERRA ACT 2600

Dear Treasurer

I hereby make application pursuant to the Freedom of Information Act for copies of all documents (including correspondence, memoranda, briefing notes and other papers) held by you or your Department that relate to the Commonwealth's knowledge of, and

discussions with the Victorian Government regarding, the latter's action in exceeding its 1991/92 borrowing limits set by the Australian Loan Council.

Having regard to the public interest in this issue, as evidenced not only by the public statements made by you and the Victorian Treasurer but also by your release of some relevant documents, subsection 33A (5) of the FOI Act removes any grounds for refusal to release the requested documents.

While I enclose my cheque for $30 being the requisite application charge, I request remission of all fees and charges relating to this application on the ground that the release of this material is in the public interest.

Kindly acknowledge receipt of this application.

Yours sincerely

jjv* Pete

Enclosure

Parliament House, Canberra, A .C .T. 2600