If they win the 2013 election, how will they do that? (delimiter reports a 'pause')
In a Business Spectator piece yesterday commenting on Joe Hockey in the Australian, Rob Burgess gave us an insight of the mechanism of the NBN Co funding 'pause':
And Hockey is promising not to borrow again. The Coalition, to date, has said it will cut spending and deliver tax cuts if it wins power in 2013, and stop issuing so many Commonwealth government securities – Malcolm Turnbull's 'cheaper, sooner' broadband plan is just one example of how this will be done.Burgess doesn't speak for the Coalition, nor is this a policy statement, but it does come from what has appeared over time to be an informed source.
It sounds like a no-brainer – surely we don't need to keep borrowing to build inefficient state-owned enterprises? And if we sack a few thousand public servants and use the money for tax cuts, won't that money be spent by the private sector on investment/consumption?
What will the impact on NBN Co if the Coalition stop funding it relatively early in the build-out?
- Sunk costs can't be unspent and existing debt will have to be repaid, possibly very quickly.
- Deployed services, infrastructure and installations could remain in service.
- For the project to proceed, new sources of funding, debt or equity would be needed.
- Could NBN Co issue its own bonds?
- What rate would the market demand?
- Would they be able to fully fund their project?
- If the Coalition prematurely offered NBN Co sale,
- would they sell the whole company, at firesale prices?
- would they offer 25%-33% each to Optus and Telstra? (and get their buy-in)
Killing projects early usually doesn't leave much of value. Think of a city skyscraper that is barely built to street level. A huge amount of money has been spent in digging the hole, setting foundations and forward ordering long-leadtime items. If the project is abandoned, it can't even be sold for land value: it will cost a new owner dearly to demolish what's there and restart.
This is an important contingency and one that NBN Co must plan for in detail before the 2013 election.
Hopefully by the 2013 election, early or late, the Fixed Wireless and Satellite components will be fully deployed, or already paid for and able to be completed. Regional Backhaul is already in place and the 121 Points of Interconnect must be in construction now.
Will the Government allow NBN Co to publish, in whole or part, it's contingency plan for a Coalition funding "pause" (read halt and never any more)?
I hope Conroy allows this as it may influence some voters: the wilful destruction of a once in a generation infrastructure refresh and deliberate waste of some billions is an "interesting" political act. To some, it will be as heinous and long-remembered as Meg Lees backflip on the GST, the cause of the demise of the Democrats.
An NBN Co statement will answer an important question: How much value is the Coalition prepared to destroy for the sake of an ideological position?
In the current "Economic Rationalist" view of the Coalition, the deliberate waste of upto $10B of public money, just to win political points, should, you'd think, be unthinkable This would open them to a decade or more of attacks for "lack of vision", "destroying our future competitiveness" and "wanton waste".
Mr Turnbull could, but on past performances don't expect it, conduct talks with NBN Co prior to the 2013 election on how to maximise their value under a Coalition administration. That would show real concern for minimising waste of public monies, not blindly following an ideological position.