Underworld links, porkies, debt junkies, pokies

4. The Victorian underworld, Labor and the CFMEU

By Stephen Mayne

We all know that Victoria has the toughest building unions in the country and Melbourne has been in the grips of a brutal underworld killing war for the past five years, but never before have the two been so comprehensively linked as over the past few days.

The court case involving sacked Primelife CEO Ted Sent has featured underworld figure Mick Gatto giving evidence and there's been a truckload of media reports about the $200,000-plus in cash that he pocketed from Primelife over the years. Gatto has explained how he keeps the peace on building sites, ensures they are closed shops for the CFMEU and even averted a death threat against Sent.

Then we had The Age's extraordinary story yesterday about the asbestos-ridden power station across the road from its Lonsdale Street offices which has involved everyone from Gatto, the CFMEU and now some colourful Russian characters. However, it was the first time a direct link has been made between the CFMEU and Gatto.

Senior CFMEU organiser John Setka confirmed that he is "a family friend" of Matt Tomas, Gatto's business partner in Elite Cranes. Setka's fiancee Helen Bouzas did some environmental consulting on the power station site and also sat on a board with Tomas for ten weeks last year.

Nigel Hadgkiss, the Federal Government's deputy commissioner of the Australian Building Construction Commission, wrote in The Age that he now has "grave concerns about elements of organised penetrating the building industry". He went on to say that police forces largely ignore the criminal behaviour because they view it as "industrial" and believe "it is their function to maintain the peace, not enforce the criminal law".

Hmmm, how much of this culture in Victoria occurs because the police believe the state government do not want the book thrown at the CFMEU, like the Cain government did in the 1980s when the BLF was deregistered. After all, the various divisions of the CFMEU, whether through donations or "other receipts", gave the Victorian ALP the following amounts over the years:

1998-99: $101,300
1999-00: $53,235
2000-01: $111,517
2001-02: $112,255
2002-03: $128,356
2003-04: $201,891
2004-05: $195,211

Total: $903,765
Average: $129,109

Then again, given that Steve Bracks refuses to do anything about George Seitz, arguably the worst Labor branch stacker in history, why would he suddenly take the moral high ground with his benefactors at the CFMEU?




5. Deconstructing Michael Egan's zero debt porkies

By Stephen Mayne

Even more amazing than the media's sudden embrace of huge public sector debt increases is the fact that governments across the country have somehow created the delusion they are debt free. Michael Egan, the former NSW Treasurer who created the current financial mess, had a classic letter in The AFR yesterday which baldly claimed that "the state's actual general government net debt is now zero".

Bollocks! Check out page 4-5 from this section of the NSW Budget papers and you'll see that gross government sector debt is forecast to be $13.68 billion by 30 June, 2006. For net debt to be zero, the NSW budget sector has to have $13.68 billion in cash or cash equivalents sloshing around somewhere, and there's no sign of that in the current crisis.

Even using dodgy public sector accounting, page 1-13 from this section of the NSW budget papers claims that net budget sector debt was $2.3 billion as at 30 June, 2005, and no one is claiming NSW is headed for a cash surplus of $2.3 billion in 2005-06. So much for "zero". But what's $2.3 billion between friends when we're talking hoodwinking that runs to tens of billions across the country? Only a Labor Treasurer could claim billions in debt don't exist, a bit like the $600 annual payment Mark Latham and Wayne Swan claimed wasn't "real".

However, Liberals are also partial to multi-billion dollar accounting ruses. Peter Costello's contribution to this Australia-wide phenomenon of misleading public sector financial reporting has been his $29 billion blowout in federal unfunded superannuation liabilities to $98 billion, which hasn't been run through his Budget bottom line – something which would be illegal if tried by a public company.

Michael Egan's dodgy debt dealings in NSW also extend to forcing public trading enterprises to borrow billions to pay dividends to the Budget so that an "operating surplus" can be reported. The scale of this scam has amounted to $7.5 billion since 2000, because that's how much the budget papers claim "net debt" has increased in NSW PTEs over the past six years. This, of course, starved the electricity, water, ports and transport companies of capital – something we're all paying for now.

Public sector accounting is one of the great scandals of Australia. The ACT finally came clean with a more honest set of accounts this week and look what happened – the toughest budget since Jeff Kennett's effort in 1993. The Labor Party cannot hide the mess it has made of NSW finances any longer, and the media should be hounding them to come clean.

Liberal Party fixer Michael Kroger memorably claimed that the Liberal Party at a state level has been confined to the receiver-manager role whereby voters will only elect them to fix up a monumental Labor financial mess. The conservatives might have lost 19 straight state and territory elections but NSW is now truly in need of a dose of tough love – although severe doubts remain over whether Peter Debnam is the man for the job.




6. Media debt junkies miss huge debt piles

By Stephen Mayne

Has anyone else been surprised by the number of journalists and commentators who are applauding state governments across the country for becoming debt junkies once again?

The SMH produced this interesting report about Michael Costa's belligerent performance with ABC Sydney's Virginia Trioli yesterday, which concluded as follows:

But there was little incivility with Alan Jones on 2GB. He began by declaring: "The willingness to get into debt – I don't have any problem with that." It was all friendliness from there.

The Courier-Mail's Jamie Walker put it as follows:

Running up state debt by $17.2 billion over the next four years to fund capital works and resuscitate the public health system is a long overdue use of the state's strong financial position.

The Courier-Mail's editorial took a similar line and talked about the timing in which Queensland "will be entering the financial markets for funds", as if to suggest it has no debt at the moment and this will be a new experience.

Truth be known, Queensland currently has record gross public sector borrowings of $25.45 billion, as this page from its central borrowing authority website, the Queensland Treasury Corp, reveals. While the media were talking about Queensland's $2.82 billion surplus in 2005-06, the QTC actually saw its debt blow out by almost $1 billion in calendar 2005.

Therefore, if you suddenly add $17.2 billion to this debt pile in four years, our financially strongest state will find itself swimming in gross debts of $43 billion by 2010. Sure, there are plenty of saleable government assets if a financial crisis emerges, but the key point that the Queensland media have completely missed is that the Sunshine State already has substantial debt, and substantial tax rises now loom on the horizon.

It's all very well to say debt is great, but stacking on more than $4 billion a year – as NSW and Queensland are now both proposing – is utterly unsustainable and will inevitably lead to either substantial tax rises, brutal cost cutting or a combination of the two. Would the Queensland commentariat be equally enthusiastic about big tax rises to fund this unprecedented infrastructure spending spree?




23. Why James Strong should disown the pokies

By Stephen Mayne

The Herald Sun is continuing to kick the Bracks Government hard over its addiction to gaming revenue and yesterday's phone poll concluded that 95% of readers don't want any more pokies polluting their state.

The push by Woolworths to potentially acquire its own pokies licence in Victoria, or win the right to own the machines in its 83 Victorian pubs, will put the retailing giant in the midst of a long and bruising debate over the coming 12 months until the government announces the industry structure it will adopt after the Tattersall's and Tabcorp licences expire in 2012.

I'm contemplating simultaneously running for the Woolworths board and state parliament on an anti-pokies platform in November, but reckon the retailing giant will have a new chairman by then because the heat in the kitchen will get too hot for James Strong. The former Qantas CEO and IAG chairman is now overloaded with commitments having re-joined the Qantas board and added the chair of the Australia Council to a long list of arts gigs, which doesn't sit comfortably with the way Woolworths promotes poker machines to braindead problem gamblers in Melbourne's poorest suburbs.

Other corporate leaders have bailed from the pokies under a bit of public pressure. During an all-too-brief stint editing The AFR's Rear Window column in 1999, this edited item appeared on 24 August, 1999.

Foster's pokies under wraps

Shhhhh. Don't mention the pokies profits. Foster's Brewing continued its low-key policy about being Australia's biggest pokies company when Ted Kunkel unveiled another impressive set of results yesterday. Buried in the result was a line that Australian Leisure and Hospitality had lifted EBIT from $54.1million to $81.2 million in fiscal 1998-99.

This was largely driven by the Austotel acquisition from Brierley Investments last year, but Foster's continues to pretend it's much more than an opportunistic gaming strategy given that Australians are the biggest gamblers in the world and service 21 per cent of the world's poker machines.

John Howard says he's ashamed about Australia's gambling addiction, but Foster's chairman John Ralph, a regular churchgoer, is clearly happy to make hay while the pokies sun shines. Foster's lifted its poker machine numbers from 3,400 to 5,770 over the 12 months as its pub portfolio expanded from 100 to 150.

Lo and behold, devout Catholic Ralph retired the very next day, although he might have been going anyway.

Woolworths bought ALH in 2004 and is now Australia's biggest pokies player, with more than 5000 machines in Victoria alone. Church going CEO Roger Corbett claims to have been morally challenged by this, but went ahead anyway with the support of chairman Strong.

Gaming has become more mainstream in Australia than any other country in the world – just look at the corporate powerbrokers on the PBL board – but surely someone like Strong doesn't sleep well at night knowing the misery Woolworths is causing. Only last week I heard of a single mum who dropped $7,000 in 45 minutes playing their machines. It's a disgrace and Australia's new Mr Arts should resign forthwith.

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