A Tough Budget With Added Pork


How tough is tough enough? Treasurer Mike Baird’s announcement of a strategy to combat NSW’s not-so-lovely figures has been met with praise from plenty of pundits. The budget, which derives a large chunk of its savings from slashing public sector wages, is classic austerity:

"In difficult economic times, this was always going to be a classic "tough" budget — and so it has proved," wrote the Sydney Morning Herald’s State Political Editor Sean Nicholls.

The NSW deficit, which was was meant to top out at $718 million at the end of this financial year, has prompted this sudden outburst of toughness. Where the state’s financial position was meant to return to a $292 million surplus over the 2012-13 year, instead the deficit will bulge to $824 million. A surplus of $289 million is tipped to arrive a year later in 2013-14, Baird says.

Baird reckoned that on the spending track left by Labor, "…budget deficits were expected to grow, reaching $2.4 billion by 2014-15. Had these circumstances continued, the triple-A credit rating was likely to have been lost within the current term of government."

Losses from GST revenue were to total $395 million this year, and $5.2 billion over the next four years. According to Baird, Gross State Product (GSP) growth will have been 2.5 per cent at the end of the financial year, instead of the 3.5 per cent originally tipped.

So NSW, never one to buck a trend, has taken the worldwide austerity model to heart: slash the public sector and sell off the farm. But in the best tradition of the Liberal Party, there’s a bit of pork to go around too.

The big ticket reduction is the culling of a further 10,000 public sector places on top of the 5000 already marked for redundancy. Agency heads will have to cap labour costs, reducing their spend on wages by 1.2 per cent a year. This will mean either sackings or wage reductions.

Police, nurses and teachers won’t be subject to the cuts — in fact the police budget will be boosted and 400 new officers recruited at a cost of $178 million to execute O’Farrell’s growing law and order regime, as reported in New Matilda earlier this year. 500 new nurses will also be hired.

Firefighters, on the other hand, will suffer a $30 million cut to wages, amounting to a 2.5-3 per cent wage decrease. This accompanies O’Farrell’s push to alter the Industrial Relations Commission by prohibiting it from awarding alternate pay outcomes — so the decrease will be locked in.

As Fire Brigade Employees’ Union State Secretary Jim Casey wrote in New Matilda last year when he foreshadowed the cuts, this is an attack on more active unions like the FBEU and yet another attempt to squeeze productivity from public sector workers without corresponding wage increases

Another $1.24 billion worth of public sector cuts are yet to be announced. Baird claims those decisions will be devolved onto individual ministers, but where they’ll fall remains unclear. Some are tipped to hit rural workers in the Department of Primary Industries. Both the Greens and NSW Labor have criticised Baird’s cuts for a lack of transparency:

"What we’ve seen in 15 months of the O’Farrell Government is when they cut services they cut them from the most vulnerable," Opposition leader John Robertson told the ABC.

"We saw foster carers’ allowances cut, we saw the vision care program cut, we saw increases in public housing rents of 10 per cent. There’s no doubt, wherever these cuts come from, they’re going to impact on the most vulnerable."

The public sector cuts are accompanied by the sale of public assets. The decision to fold Port Kembla into the sale of Port Botany will, according to Baird, deliver $400-500 million to the budget bottom line, $100 million of which will go to infrastructure building in the Illawarra.

Unions NSW has criticised the sale, saying that it will give a monopoly to one company across both ports and drive up prices.

The state’s infrastructure spend has also been shifted. O’Farrell has reneged on the plan to 50 per cent fund a doubling of the Pacific Highway in conjunction with the federal government, insisting they pay 80 per cent, while spending over $3 billion on the North West Rail Link, $127 million on 269 new buses and $30 million for a as yet unannounced new Sydney motorway.

Lobby group Infrastructure Partnerships Australia welcomed the decision and encouraged O’Farrell to hasten the sale of the state’s electricity assets, which are eating up another 25 per cent of the infrastructure allocation.

While investment in infrastructure is long-overdue in NSW, Baird plans to fund part of it by raiding State Super — public sector superannuation — a move described by Public Service Association general secretary John Cahill as something akin to treating super as a "private piggy bank".

In the middle of Barry and Baird’s slash-and-burn, there’s one big chunk of pork being rolled out. NSW will cut its current first homebuyers’ grant of $7000 for existing homes, and replace it with a $15,000 bonus for buyers of new homes from 1 October.

According to The Australian’s Imre Saluzinsky, "the first-time buyer of a new home worth $640,000 — roughly Sydney’s median house price — would enjoy over $17,000 in benefits, $10,000 more than under the previous system."

Baird described the scheme as the "most generous in Australia" and Robert Gottliebsen at Business Spectator describes it as a push to make housing more affordable and drive a resurgence in purchasing, which has been flagging. In time it may be shown up as an attempt to put air back into a slowly deflating property bubble.

To top everything off, a tough 12.5 per cent rise in speeding fines will add another $180 million to the coffers. This may be the toughest decision of all — especially from the perspective of a sacked fireman pulled into a speed trap on the side of the half-finished Pacific Highway.

New Matilda is independent journalism at its finest. The site has been publishing intelligent coverage of Australian and international politics, media and culture since 2004.