Financial performance of government trading enterprises 1999-00 to 2003-04

7 Jul 2005

Government Trading Enterprises (GTEs) provide services in key sectors of the economy — including electricity, water, urban transport, railways, ports and forestry. In 2003-04 the 83 GTEs monitored in this report controlled assets valued at more than $174 billion and generated $55 billion in revenue.

Aggregate profitability increased in all sectors, other than rail and forestry, in 2003-04 compared with the previous year.

Over a longer period, the profitability of 50 GTEs (excluding Telstra) monitored continuously since 1999-00 did not improve, with the aggregate return on assets falling slightly from 6.8 per cent to 6.7 per cent.

The aggregate debt to assets ratio rose from 26 per cent in 1999-00 to 29 per cent in 2003-04.

Nearly half of the 83 currently monitored GTEs earned less than the long-term bond rate in 2003-04. An even greater number failed to earn a commercial rate of return (which includes a margin for risk).

In total, currently monitored GTEs made tax-equivalent and dividend payments to their owner governments of almost $7.9 billion in 2003-04.

There are some deficiencies in the governance arrangements for GTEs. Given the economic significance of the GTE sector, improvements in governance could yield significant benefits to the community and reduce the need for GTEs specific regulation. These improvements should include:

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