NSW: The Failed State


You know a state government is serious about fixing the budget when MPs’ annual overseas first class trips get canned. But beyond that it’s hard to be sure what they’re thinking when the global economy lurches to a standstill and that same government decides to curl up into the economic foetal position while everyone else is doing their best to stimulate their economies.

Cutting overseas trips sounds great, but does the rest of the state have to suffer as well? With Eric Roozendaal as Treasurer and Joe Tripodi as Finance Minister, the NSW Government has delivered the sort of mini-budget we probably should have expected from them. There’ll be no anxious wait to see if Kevin Rudd’s largesse can prevent a recession in NSW — Premier Nathan Rees has just about guaranteed one.

The NSW economy has been under-performing for some time and when Michael Costa resigned in September, the former Treasurer left a parting gift: the news that the state was losing $90 million per month. The Costa/Iemma plotline for NSW was supposed to have the economy rolling in clover — due to electricity privatisation with a (possible) sale price of $22 billion. That didn’t happen and other strong revenue sources like stamp duty are similarly folding up in a heap.

Enter this November mini-budget. Rees would like to tout his plan as one that makes savings of $3.3 billion over the next four years, via "back-office savings and administrative cuts". The electorate, already treating the NSW ALP as the toxic sludge it has largely shown itself to be, are only seeing the spending cuts and increases in fares, taxes and charges. Spooked by the global financial crisis, budget items such as increased childcare fees, higher road tolls, cuts in overtime pay for nurses and freezing recruitment of non-frontline public servants will do little for Labor’s popularity.

Bike-loving Nathan Rees has turned on car-loving Sydney. Car parking fees will rise, tolls will also go up. Basically we will have a congestion tax by stealth, without having to construct those naff toll barriers around the CBD perimeter. Variable tolls on our Harbour Bridge, whether due to the paradigm shifting nature of this concept or the knee jerk reaction to any toll increase, has Sydney’s North Shore in a rage (again). I have to agree, who would want to be driving down the Warringah Freeway to see a sign flash past saying:

TOLL: Peak periods (between 6.30 am-9.30am, 4pm-7pm Mon-Fri) will pay $4; shoulder peak (between 9.30am-4pm Mon-Fri, 8am-8pm weekends and public hols) pay $3; off peak of $2.50

Imagine pulling a stunt like this before e-tags.

All this might suggest Rees was encouraging patronage of public transport, but it’s not so. Already overcrowded and under-funded, Sydney’s chaotic public transport system will not (at this stage) be given a metro lifeline in the North West Metro (saving $12 billion) or the South West Rail Link (saving $1.4 billion). Government spin-meisters are suggesting private interests may yet turn up, keen to invest in proposed transport capital works, but it’s difficult to envisage any private enterprise wanting to do business in NSW.

It seems that you can’t have a state (mini) budget without selling some assets, so NSW will be losing NSW lotteries, government electricity retailers, power generation trading rights and power station development sites.

Interestingly, there are a few non-vital items that have been left untouched which could have also brought in significant savings.

For example there’s still apparently every reason to go ahead with Nathan Rees’s own pet projects, the unpopular and unnecessary desalination plant at Kurnell — at a total projected cost of $1.9 billion — plus a pipeline through Sydney’s inner west for $650 million. Then there’s the proposed Tillegra Dam, again unnecessary and estimated to cost $400 million.

The Premier obviously thinks good communications will also be vital for the state in this difficult period — specifically Government communications. Having admonished the Iemma government for all its spin, Nathan Rees has his very own cabal of spin professionals, who have already cost NSW around $1.6 million.

At this point, 18 months ahead of a massive electoral flogging, why is NSW Labor doing this? In the long-sighted interests of responsible government? Actually, no. They’re doing it to save the state’s AAA credit rating.

As Fairfax’s Ross Gittins recently said, "It’s appropriate (and desirable) for budgets to fall into deficit when the economy is entering or leaving recession (or a serious downturn)". Nathan Rees clearly wants workers of NSW, children, and the happy grey brigade to sleep soundly knowing NSW may grind to a halt, but we’ll still have a terrific credit rating.

Anyone who remembers how in March 2008, credit raters Standard & Poors (S&P) were forecasting Lehman Brothers to post a profit of only between 20-30 per cent lower than in 2007 may have added reservations about putting all their faith in high credit ratings.

Fortunately Sydney, with it’s very short attention span is used to political turnover and backflips. NSW Labor is currently on a roll with sackings, resignations and chickens coming home to roost. Kevin Rudd has a real failed state on his doorstep and we can only hope we get our very own intervention.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.