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Request for audit
Effectiveness of the Commonwealth Government’s debt management
Response provided
Responded: Friday 24 July 2020
Contact
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The Auditor-General responded on 25 May 2020 to correspondence from Senator Katy Gallagher dated 4 May 2020, requesting that the Auditor-General conduct an investigation to examine the effectiveness of the Commonwealth Government’s debt management given the significant and rapidly increasing Commonwealth government debt levels as a result of the COVID-19 pandemic. The Auditor-General provided a follow-up response to Senator Gallagher on 24 July 2020.
Auditor-General's follow-up response
24 July 2020
Senator Katy Gallagher
Shadow Minister for Finance
Shadow Minister for the Public Service
By email: senator.katy.gallagher@aph.gov.au
Dear Senator Gallagher
On 25 May 2020 I wrote to you noting that I would consider your request for an audit into the effectiveness of the Commonwealth Government’s debt management, specifically focusing on the debt resulting from the government’s response to the COVID-19 pandemic, in the development of the Australian National Audit Office (ANAO) 2020-21 Annual Audit Work Program (AAWP).
Your request was carefully considered in relation to other competing priorities for audit coverage across the public sector, including audit topics related to the government’s response to COVID-19, and I decided that an audit of the program you referred is not currently a higher priority than other audits currently included in the AAWP and therefore has not been included as a potential audit topic in the program. I will however consider the matters you referred in the consideration of audit topics for the inclusion in the 2021-22 AAWP.
The AAWP is available from the ANAO’s website at https://www.anao.gov.au/work-program.
The ANAO will continue to monitor emerging risks and challenges that impact on the public sector and review planned audit coverage throughout the year in response to these factors. I also intend to undertake further consideration of COVID-19 related topics as the government response to this pandemic is implemented.
Yours sincerely
Grant Hehir
Auditor-General's response
25 May 2020
Senator Katy Gallagher
Shadow Minister for Finance
Shadow Minister for the Public Service
By email: senator.katy.gallagher@aph.gov.au
Dear Senator Gallagher
Thank you for your correspondence of 4 May 2020 requesting I consider a performance audit into the effectiveness of the Commonwealth Government’s debt management, specifically focusing on the debt resulting from the government’s response to the COVID-19 pandemic.
I will consider including this topic in the context of finalising the Australian National Audit Office’s 2020–21 Annual Audit Work Program.
Yours sincerely
Grant Hehir
Correspondence from Senator Katy Gallagher
Transcript of letter from Senator Katy Gallagher
Mr Grant Hehir
Auditor-General for Australia
Australian National Audit Office
GPO Box 707
CANBERRA ACT 2601
By email: grant.hehir@anao.gov.au
Dear Mr Hehir
I write to request the Australian National Audit Office (ANAO) commence a performance audit into the effectiveness of the Commonwealth Government’s debt management given the significant and rapidly increasing Commonwealth government debt levels as a result of the COVID-19 pandemic.
The Government has increased the notional debt ceiling from $600 billion to $850 billion acknowledging that significant additional borrowings have to be undertaken over the next two years to finance the Government’s announced economic responses to the pandemic crisis.
As you would be aware, Australian Government debt was already historically high by national standards prior to the COVID-19 pandemic with net debt at $403 billion and gross debt climbing to $561.8 billion as at the end of December 2019. As at 1 May 2020 there is now $607.4 billion of Australian Government Securities on issue including $75 billion worth of bonds being issued this year alone.
While Labor acknowledges that the state of the 2019-20 budget required additional borrowing to pay for the COVID-19 economic response packages, we do believe that external scrutiny of how the Government’s rapidly increased debt is being managed is required.
Critical decisions taken by the Government on how debt is managed will have financial implications for years to come and an independent review of the Government’s debt management practices would provide some assurance to taxpayers about how that debt is being managed by the Government through the Australian Office of Financial Management.
It would also be a timely audit as Labor understands that the last performance audit into debt management was conducted in 1999, with a follow-up audit in 2005.
Since then, there is reduced parliamentary scrutiny in relation to debt management as in 2013 the Government changed the way the debt ceiling is increased. Given the Treasurer has stated that the increased debt burden would "be shouldered by generations to come", Labor believes that an examination of Commonwealth debt management would be prudent and timely. This could occur either as part of the ANAO's 2020-21 general work program, or as part of the ANAO's proposed COVID-19 audit program.
I am happy to discuss this request with you in more detail if that is useful. The contact in my office is Mr Alex Lim, who can be contacted at Alexander.Lim@aph.gov.au
Yours sincerely
Katy Gallagher
Senator for the ACT
4 May 2020