Financial Performance of Government Trading Enterprises 1998-99 to 2002-03
Commission research paper
This paper was released on 20 July 2004. This report is the second in a three-year program of research designed to provide comparable information on the financial performance of government trading enterprises (GTEs).
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Financial Performance of Government Trading Enterprises 1998-99 to 2002-03 (ZIP 1.4 MB)Government trading enterprises (GTEs) occupy key sectors of the economy — including electricity, water, urban transport, railways, ports and forests. In 2002-03, the 84 GTEs monitored in this report controlled assets valued at more than $170 billion and generated $58 billion in revenue.
The aggregate return on assets of the monitored GTEs (excluding Telstra) was largely unchanged between 2001-02 and 2002-03, following a fall in the previous year.
Profitability in the electricity, ports and forestry sectors improved in 2002-03, whereas in the railways sector it has declined. The position of the water and urban transport sectors was largely unchanged.
Over a longer period, the profitability of 52 GTEs (excluding Telstra) monitored continuously from 1998-99 until 2002-03 improved, with the aggregate return on assets rising from 5.6 per cent to 6.1 per cent.
Despite this longer term improvement, 50 per cent of the 84 currently monitored GTEs earned less than the long-term bond rate in 2002-03. An even greater number of GTEs failed to earn a commercial rate of return, which includes a margin for risk.
The overall level of debt increased among the 52 GTEs (excluding Telstra) monitored since 1998-99, with their aggregate debt to assets ratio rising from 26 per cent to 30 per cent.
The 84 currently monitored GTEs made tax equivalent and dividend payments to their owner-governments totalling almost $7.5 billion in 2002-03.
GTE reporting, performance monitoring and external auditing all have important roles to play in promoting accountability and enhancing GTE performance:
- Reporting by GTEs provides transparency, as well as accountability to shareholding ministers against agreed corporate objectives. Although some GTEs have received awards for their reporting, a number appear to fall short of best practice.
- Performance monitoring is useful for measuring how well a GTE meets its objectives and how its performance compares over time and across GTEs. Although there is extensive performance monitoring, the results can be difficult to interpret. The relevance of non-financial measures to sometimes conflicting objectives is often unclear. Further, there is limited consistency in these measures, which constrains comparisons across GTEs.
- External performance audits by auditors general can enhance corporate governance by periodically evaluating the efficiency and effectiveness of GTE operations. The independence of auditors general and their ability to report to parliament, differentiates them from private sector auditors.
