Ken Davidson has a good summary of the various devices that make the Federal Budget about as useful as the annual reports of Enron. The prime examples are the adoption of a confused mixture of accrual and cash accounting and the use of long-term leases as a ‘debt-free’ method of financing.

My opinion piece in yesterday’s Fin (subscription required) was about public-private partnerships (PPPs). Final para

As long as financial innovation is seen to be good in itself, politicians will continue to pursue these schemes, not as a method of optimally allocating a complex set of risk, but as a source of fairy gold, from which valuable public assets can seemingly be spun out of thin air. Of course, just like fairy gold, this illusion will disappear in the light of day, leaving a mountain of debt and poorly-structured projects.

Along with some colleagues (Bruce Chapman, Arie Freiburg and David Tait), I’ve been working on the idea of using the tax system to collect fines, thereby making fines a more attractive alternative to good behavior bonds on the one hand, and short prison sentences on the other. We recently published a working paper on the topic, and Ross Gittins gave an excellent summary of our case in today’s SMH. As he says, one way of looking at it is “HECS for criminals”.