Peter Costello

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Productivity Commission Research Paper on the Financial Performance of Government Trading Enterprises

NO.071

PRODUCTIVITY COMMISSION RESEARCH PAPER ON THE FINANCIAL PERFORMANCE OF GOVERNMENT TRADING ENTERPRISES

The Treasurer today welcomed the release of the Productivity Commission's research paper into the financial performance of Government Trading Enterprises (GTEs) from 2000-01 to 2004-05.

The research paper provides an independent and comprehensive analysis of the financial performance of various GTEs, most of which are owned by State and Territory Governments.

The Productivity Commission has found that aggregate profitability increased in the electricity, water and urban transport sectors in 2004-05 compared with 2003-04, but profitability declined in the railways, forestry and ports sectors.

In particular, the Government notes the finding that nearly half of the GTEs monitored earned less than the long term bond rate in 2004-05, with an even greater proportion failing to earn a commercial rate of return (which includes a margin for risk). The proportion of GTEs falling below this threshold has not changed significantly for over a decade.

This highlights the need for continued reforms by the States and Territories to improve the performance of their trading enterprises and ensure that they earn an appropriate return on tax-payer funded assets.

As highlighted in the Commission's accompanying media release, these findings also underscore the need for continued improvement in key infrastructure areas and reaffirm the importance of the COAG commitment to a new National Reform Agenda, particularly in relation to improving productivity, competition and the efficient functioning of markets.

These reforms have the potential to increase significantly Australia's international competitiveness and deliver substantial benefits to the Australian economy.

The research paper is available on the Productivity Commission's website: www.pc.gov.au

MELBOURNE
19 July 2006

Contact: Renae Stoikos
03 9650 0244

20 Jul 2006

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