NSW government designed transport corporation to deliver budget sugar hit, auditor-general finds

The NSW government shoehorned the rollout of its controversial transport corporation to match benefits promised in 2015 budget papers, the state’s auditor-general has found, rendering a seven-year government implementation process overly costly, ineffective and opaque.

In a report handed down Tuesday, the NSW government was found to have committed future governments to ongoing financial obligations when it established the Transport Asset Holding Entity (TAHE) in order to deliver a $1.8 billion sugar hit to the 2015-16 budget, without certainty it would deliver “longer-term financial improvements”. 

The government established TAHE as a state-owned corporation to manage the state’s various transport assets in 2020, in a bid to move billions of dollars in transport costs out of the state budget.

“The process was not cohesive or transparent,” the report said. “It delivered an outcome that is unnecessarily complex in order to support an accounting treatment to meet the NSW government’s short-term budget objectives, while creating an obligation for future governments.”

The state’s auditor-general Margaret Crawford said it forced the agencies responsible for implementing the transport entity to deliver a framework that matched the promises, beginning two years before the relevant legislation was passed, despite whatever challenges arose. 

The report’s findings confirm the suspicions of Labor’s opposition treasurer Daniel Mookhey, and other critics, who have long called the establishment of the TAHE an “accounting trick”. He said he would abolish the corporation if Labor wins at the March election. 

The report also found that the government’s dependence on consulting firms saw the cost of delivering the entity almost double from initial estimates of $12.9 million to more than $22 million during NSW Premier Dominic Perrottet’s tenure as state treasurer. 

In their dealings with the big four, consultants working on the project claimed public servants had forced them into watering down criticisms of the NSW government’s rail entity. 

Former KPMG partner Brendan Lyon levelled accusations at the government during a 2021 parliamentary inquiry into TAHE, where he said he was subjected to “unprofessional, ongoing attacks” after he wrote a report that found there were holes in Treasury’s cost-benefit modelling.

In a separate report, he said Treasury’s “numbers used for the budget are wrong” and that it had “made up the benefits” that came to form its submission to cabinet on the rail corporation’s viability.

A spokesperson for NSW Treasury told Crikey the department “looks forward to continuing its constructive engagement with the Audit Office” and working with TAHE and Transport for New South Wales to “more effectively manage the state’s investment in rail assets”.