Prime Minister Malcolm Turnbull has defended the NBN as a “good debt” for the government and taxpayers because it is "secured to a financial asset” that is "going to ... generate billions" in revenue.
Speaking on ABC Radio Brisbane this morning, Turnbull was challenged as to whether the NBN represented a “good or bad debt” for taxpayers.
It came in response to a pre-budget speech delivered by Treasurer Scott Morrison where he outlined a major redefinition for how government expenditure is to be classified in the forthcoming budget papers.
Debt used to fund “major growth producing infrastructure assets” such as for transport and energy will now be classified as “good debt”, but “rack[ing] up government debt to pay for welfare payments and other everyday expenses” would be considered “bad debt” under the changes.
The government late last year provided NBN Co with up to $19.5 billion in debt funding to complete the network rollout. This is on top of the money it borrowed to fund its $29.5 billion equity stake (and which the government hopes to recoup – with interest – by selling down its stake upon completion).
Turnbull said the funds ploughed into the NBN represented a “good debt in the sense that it is secured to a financial asset”.
“The fact is it's going to be an asset that will be generating billions of dollars of revenue,” he said.
NBN Co has a revenue goal of $5 billion a year by 2020; however, it emerged in February that this is predicated on customers spending more and on higher end plans, which they are not presently doing.
Turnbull acknowledged challenges around the NBN’s market valuation. In particular, questions have been raised over when – and if - NBN Co might be in a position to repay its public debt, or whether taxpayers might be forced to write at least part of it off.
The Parliamentary Budget Office said late last year that “the final cost of the Commonwealth’s financing of NBN Co will not be known until NBN Co is privatised and the market places a value” on it.
“As to what the NBN will be worth when it is, you know if it were to be sold, you know, in ‘X’ years' time, time will tell. But at the moment, it is, has a positive internal rate of return,” Turnbull said today.
“It’s not what … your employers would want or what a commercial employer would want or a bank would want, but … giving the taxpayer a positive return.”
However, he blamed the previous Labor government for “destroying billions of dollars of value with their incompetence”.
“A lot of value that has been lost,” he said.