THE loss of billions of dollars of Telstra dividend payments means the Government will have to run down budget surpluses or spend less on health, education and infrastructure, Finance Minister Nick Minchin has suggested.

Telstra's full sale would involve a "fiscal tightening", implying less cash would be available for other spending priorities.

"We have been up-front about the fact that this policy involves an implied fiscal tightening," Senator Minchin said yesterday.

The Government's 6.4 billion Telstra shares, valued at $31 billion at today's prices, generate dividend payments that swell the budget bottom line by about $1.5 billion a year.

But unlike the previous two Telstra share floats, the proceeds from the sale of the remaining 51.8 per cent stake will not be used to pay off debt. That means there will be no interest saving to offset the lost dividends.

They sort of gloss over the reason that the proceeds of the sale won't be used to pay off debt.

The reason is this: There isn't any.

The Australian federal budget has been reaping such huge surpluses for so long that the government has been able to pay off its entire debt.*

I think it's just a little bit unfair to criticise the government for not paying off a debt that it's already paid off.

* That's purely federal, public-sector debt, though, and says nothing about state or local governments - which mostly suck - or the private sector. Also - I need to look this up - the final payments may be coming in the next financial year, but still require nothing from the Telstra sale.

Posted by: Pixy Misa at 05:14 AM | Comments (6) | Add Comment | Trackbacks (Suck)
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