Financial Performance of Government Trading Enterprises, 1999-00 to 2003-04

The Productivity Commission has released an update on the financial performance of 83 Australian, State and Territory Government trading enterprises (GTEs). The study provides data on their financial performance over time and includes comparisons of performance among GTEs in the same industry.

In 2003-04, profitability increased in all sectors, other than rail and forestry, compared with the previous year. Despite this improvement, over half of the currently monitored GTEs are still not fully achieving their commercial objectives.

The findings of a three year research program into GTE governance are also included in this study. These findings elaborate on issues raised in the Commission’s recent National Competition Policy Inquiry Report.

Commissioner Tony Hinton said that ‘without a commitment to better governance, the National Competition Policy reform objective of operating GTEs commercially will not be fully achieved’. He added, ‘failure to meet this objective has potentially serious consequences, given that these GTEs have combined assets of more than $174 billion and generate $55 billion in revenue annually’.

The Commission highlighted the following as important areas for improvement in the governance of GTEs:

• clarification and public scrutiny of the rationale for ongoing government ownership of GTEs;
• greater clarification and transparency of GTE objectives (both commercial and public interest); and
• making a clearer distinction between external and internal governance, with improved transparency of the external governance role of government ministers.

Financial performance monitoring of GTEs forms part of the Commission’s research into the performance of Australian industries and the progress of microeconomic reform. The GTEs monitored provide services in key sectors of the economy — including electricity, water, urban transport, railways, ports and forestry.