Tuesday, September 9, 2014
Our recent post about the Millers Point social housing sell-off triggered a discussion in the comments section about the NSW Land and Housing Corporation's finances. Let's have a look at LAHC's most recent (2012-13) annual report, and particularly its statement of cash flows (page 31), to find out where LAHC's money came from, and where it went.
First, the money going in (receipts).
In 2012-13, LAHC received, in total, $1.17 billion from its operating activities and investing activities. Most of this money – $762 million – came from tenants, in the form of rents and other charges (yes, social housing tenants pay money to LAHC, not the other way around).
The next largest source of receipts was sales of property, plant and equipment. Proceeds of sales came to $190 million, of which $152 million were from sales of residential properties.
In third place, government grants to LAHC came to $145 million. Of this, $19 million came directly from the Federal Government, the rest from the NSW Department of Family and Community Services... but at least some proportion of that State money came indirectly from the Federal Government, because it gives the NSW State Government about $400 million per year for various housing-related purposes under the National Affordable Housing Agreement. (And as an aside, Federal government money is not taxpayers' money).
Now, the money going out (payments).
'Property and residential tenancy' payments were the largest category – at $454 million – and include payments for council and water rates ($210 million) and repairs and maintenance ($203 million).
Next largest were payments for the purchase of property, plant and equipment: $265 million. Of this, $115 million was spent acquiring, redeveloping and building social housing.
And then there were payments for administrative and working expenses ($164 million), personnel services expenses ($55 million) and some smaller categories. Total payments: $1.04 billion.
So, at the end of the 2012-13 year, LAHC's total receipts exceeded total payments by $133 million. Add to that $30 million cash from the previous year, LAHC ended the year with $163 million in the bank.
It also ended the year with 1 328 fewer social housing properties (145 248 properties). The total value of its assets, however, was up $2 billion ($34 billion).
Some interesting points:
- Rents and other charges received from tenants ($762 million) were more than enough to cover all payments relating to operating activities ($726 million, being council and water rates, repairs and maintenance, admin, etc).
- LAHC received $152 million from the sale of social housing stock, but spent considerably less ($115 million) on purchases of new social housing stock.
- The Auditor-General elsewhere reports that in 2013 LAHC had a maintenance backlog of $317 million... yet it also had $163 million sitting in the bank.
According to your argument (which is grossly misplaced, might I add) all of those monies are just a fabrication or construct. You suppose a government who is 'always solvent, and can afford to buy anything for sale in their domestic unit of account even though they may face inflationary and political constraints' (quoting your Wikipedia source). Tell that to Argentina. Or more recently Greece. Or Spain. Or...
Your proposition (first paragraph) is wrong. Currency-issuing governments do not spend tax receipts. LAHC receives income from tenants. LAHC is not a currency-issuing government.
A government that issues its own currency is indeed always solvent with regard to liabilities in its currency.
Argentina has its own currency, but from 1991-2002 pegged it to another currency ($US).
Greece and Spain do not have their own currencies.
Crucial differences from Australia.
Further reading:
http://bilbo.economicoutlook.net/blog/?p=24010
"The Australian Government spends by crediting the bank accounts of recipients of payments. This is effected by crediting the relevant banks' reserve accounts at the Reserve Bank by the same amount. ...When a person pays taxes to the Australian Government, they direct their bank to debit their account in favour of the Government and, in doing so, the bank also directs the Reserve Bank to debit its reserve account by the same amount."