Saturday, 18 April 2009

How to turn $43 billion into $100 billion

Now for my next magic trick......

The mortgage calculation that I did yesterday on a $43 billion debt with a 30 year repayment horizon spat out annual repayments of $3.4 billion.

Now, if you multiply $3.4 billion by 30 years you get ..... not $43 billion but $102 billion. As anyone with a mortgage knows, you pay the bank more in interest than you initially borrow. In this case, you borrow $43 billion and end up repaying just a shade under $60 billion in interest.

Have any of these morons in Treasury done their numbers?

3 comments:

Wand said...

Have any of these morons in Treasury done their numbers? That's easy to answer. No.

VodkaBlogger said...

Hi BOAB:

I saw this masterpiece of maths at Crikey today:

"I want to address something around the costings of NBN which I see people bandy around as being too expensive, or out of the question for ordinary Australians to spend. I've done some sums (and I'm definitely no mathematician, so have at it):

•Total cost = $43,000,000,000
•Annualised Over 10 years = $4,300,000,000
•Expected number of connections = 6,000,000
•Total cost per year per connection is = $716.67

OR

•$59.27 per month
Let's add 10% for management, maintenance/upgrades and billing costs.

Total cost is $65.70 per month per site if 6 million sites sign up. That's far less than the $150 today mentioned by your Week in Geek writer. 6 million Australians is less than a third of Australians signing up, a reasonable estimate in my guesses. (This obviously excludes the cost of borrowing, opportunity costs etc -- let's say we get them back in economic stimulus)."

I reckon this has got to be off by a huge factor as it:

(a) doesn't take into account the costs of actually *using* the NBN but only the construction costs. Surely the ISPs are going to be charging something on top of the physical costs of the network?

(b) The author seems a bit confused about broadband connections (sites?) and people. He states that 6 million Australians is less than a third of Australians but in fact what he means is 6 million broadband connections (households). In 2001 there were 7.4 million households (ABS) so, allowing for an increase, we're looking at connecting not one third of households but closer to 75% of households (I've not taken businesses into account here, obviously).

The author finishes with this:

"Apologies if the figure is wrong, but if someone smarter than me can do the figures I'd be interested in the outcome factoring in a business addition."

It might be worth forwarding a few of your recent posts to Crikey.

Boy on a bike said...

Dear Vodka

Thank you for the pile of tripe from Crikey - seems someone at Crikey failed maths.

I would post a comment there, but it means signing up for a deluge of dribble from their talentless hacks. They'll just have to live with their delusions a little longer.

Regards

BOAB