Government Debt – The Real Story

The news this week of the Queensland Government raiding the public service superannuation fund to the tune of $4b certainly grabbed a few headlines.  It also reinforced our article on superannuation confiscation recently.  Last night Ross Greenwood interviewed actuary Michael Rice of Rice Warner where he revealed that Australia as a whole has unfunded Government superannuation liabilities of $143 billion.  That is AFTER the $117 billion allocated in the Future Fund.  The ironic bit is that Queensland is the only state that has funds allocated; the $4b was in essence ‘surplus’ (inverted commas given total budget deep in deficit).

This is something we’ve raised before and is a quirk of government.  Generally Accepted Accounting Principles (GAAP) dictate the rules on which most businesses in the world report their finances.  Such liabilities would sit on the balance sheet under such rules.  Government it seems can adopt a ‘hope’ strategy of not including such liabilities on the hope they can raise the funds in time.  Given continual deficits that’s not going so well…

If you though $143 billion was scary, the US unfunded liabilities is just plain horrific.  Everyone talks of the already incredible $19.2 Trillion US government debt.  In the US, real, unfunded liabilities amount to around $100 trillion.  To put that into perspective, if you combined the $19.2t that is on their balance sheet and the $100t that should be on their balance sheet under GAAP, it works out to be nearly $1m per US tax payer.