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NSW: a tough budget for tough times? « Previous | |Next »
November 12, 2008

The NSW mini-budget is an indication of what is to come from state governments in response to the global and economic crisis. It is to raise taxes, sell off assets, reduce infrastructure spending, cut public service spending. The neo-liberal Treasury i rules to protect the state's credit rating with rating agency Standard & Poor. The political will to reform is kept in the can in favour of measures to stunt the growth of the regional economy on the edge of recession.

Keynes, it would seem, is still out of favour. As Ross Gittens in The Age says

And if it makes the downturn worse for the people of NSW, that's just something they will have to cop. At a time when Federal Labor is increasing its spending and rapidly turning a budget surplus into a deficit to bolster the economy, it may strike you as strange that its state Labor counterpart is doing the opposite: cutting government spending and increasing taxes.You're right, it is strange. Perverse, in fact.

Though the Roozendal mini budget has the appearance of reform ---the start of an effective system of congestion taxing in Sydney with the harbour bridge toll changes and increased parking levies in major business areas---it is only an appearance. There is no investment in public transport: both the North-West Metro and the South-West Rail Link are axed.

Labor is yet to deliver enough baseload electricity to keep the lights on, hospital spending is bursting its banks, Sydney is gridlocked, and no moves are made towards shifting to a more sustainable ---carbon less--economy. Treasury rules. Close things down.

| Posted by Gary Sauer-Thompson at 7:06 AM | | Comments (9)


Alan Kohler in Big government takes over in Business Spectator says that the small-government warriors who emerged in the 1980s with Ronald Reagan and Margaret Thatcher, and who morphed into neo-cons during the past decade under George W Bush, are in full retreat. Governments have become the employers, the spenders and the lenders of last resort.

To sum up:governments have been forced, first, to recapitalise the banking system, and then to try to stimulate spending, or spend itself, in an effort to reverse the effect of the credit crunch on the real economy.

He adds that now it looks like governments will be forced to take ownership of “real economy” corporations that are too important to fail, such as GM and Ford.

It would appear that the state Treasuries are bucking--resisting?-- this new trend.

The more reality intrudes, the more they retreat into a sort of obstinate stupour.
Ruddite Roosters like Conroy folow this peculiar pattern of behaviour- am sure anthropologists and psychologists must have sub categorical definitions up and running.
For my part I'd refer to the schema of younger days based on Freudian concepts, eg "anal".
To what extent is Federal Labor encouraging these NSW Wombats in their mulish, panicked behaviours?
Might it not have been more constructive for fed Labor to have worked a little more closely with NSW earlier on, and even sent a some of the surplus its way,targetted to help them the economy regain balance before things went even further to pot ?

Missed Peter Stock's comment-thread said "0 comments".
There was a time before the Freidmanites, Reaganistas and neoliberals took over, when Labor was proud to cheerfully throw its weight behind the processes of civilisation-building.
What a mean, sad, limiting, defeatist and pernicious doctrine eco rationalism has proven to be.

Laura Tingle in the AFR today:

"Nathan Rees and Eric Roozendaal have now confirmed that they will metaphorically hold their breaths until they turn blue and force the Rudd government to come to their aid in the interests of keeping the national economy afloat."

In my view as a NSW resident, Rudd should call their bluff and tell them that there will be no federal money until they inject some sense into state fiscal policy.

As someone else has pointed out there is no point in keeping an AAA credit rating if you aren't planning to borrow.

the money was offered but not a blank cheque. eg., for some health reform. Money by itself is not going to fix the shambolic public services. Nor has the deeply conservative NSW Labor Right shown much interest in policy reform or service delivery improvement to make Sydney or the state more liveable.

Public hospitals are under great stress in NSW. The AMA says:

Not one of our hospitals is operating at a safe level. We can no longer cut beds, cut funding in our hospitals. NSW need an immediate injection of $1 billion to lift bed numbers to an acceptable level. Yesterday's announcement in the mini-budget that NSW area health services would have to save $64 million would inevitably mean more bed closures. This translates, it appears, to bed closures as in RPA closing its obstetrics and gynae ward.

The NSW Govt has a long record of stripping its hospitals of their funding over time--a decade or so. So there's not enough equipment, beds, capacity, doctors and nurses. They just want a blank cheque.

two little examples of the craziness. First the the axing of JetCat services from Manly. Secondly, the Government has factored in a roughly 38 per cent increase in train fares while making deep cuts on essential large-scale transport infrastructure projects that have been promised for years.

It should have been the other way around--reducing fares and increasing investment in transport infrastructure.


You are right.

I think what we have here at the political level is something close to a failed state. The NSW Right is incapable of governing, the NSW Left can't get rid of it and the Liberals are largely tied up in right wing Christian extremism.

Where's Jeff Kennett when we need him?

Imre Salusinszky in The Australian says that:

The pressure point at which the global economic crisis has the potential to mug public finances -- and the delivery of infrastructure and services -- is in the states and territories. Their revenue base is narrower and far more dependent than the commonwealth's on the business cycle and asset prices, they have less flexibility to respond to external shocks, and their investment in self-insurance and employee superannuation has exposed them to the collapse in global equity markets.

The 5 Labor states are still hoping that Rudd Labor would help them deliver some gleaming road and rail projects in time for the next round of state elections, beginning with Queensland in September next year.

It's reasonable expectation since the states raise 16 per cent of national taxes but are responsible for 40 per cent of public spending--- the vertical fiscal imbalance was used as a weapon against the states during the Howard regime.

An economic rationalist Treasury in NSW is anti-rail and pro-roads. It is the same agenda as that of Joe Tripodi, the Finance Minister.