January 28, 2013
Chris Kenny's Australia Day column in The Australian states the now standard conservative/neo-liberal criticism of South Australia. Once the Festival State, South Australia has become a mendicant state, reliant on federal largesse, and it risks becoming a state of stagnation. Fiscal discipline is lacking.
Kenny's core argument is that South Australia is living beyond its means:
From 2002, the early years of the Rann Labor government consolidated that work, but a decade on, those achievements have been undone. The credit rating has been downgraded, and with state debt topping out at $14bn, net debt will overshoot the government's planned limit of 50 per cent of revenue.In short, the state banked on the proceeds of a new mining boom before it happened. It increased expenditure on public sector jobs and a lavish infrastructure plan (major new hospital, sports stadium, freeways, railways) based on the expected proceeds of the $20bn expansion of the Olympic Dam copper, uranium and goldmine. With that project now scrapped, the state is stuck with the spending and a billion-dollar budget deficit.
Another example is that it SA has continued to increase the size of the public sector despite most other states heading in the other direction and that it was the highest taxing state for business.
It is one long list of negatives. Even though the government boasts of having more wind-generated power than any other state Kenny says that a study last year by the Energy Users Association found the state has the nation's highest electricity costs. Kenny implies that this is due to renewable energy, even though the wholesale price of electricity has decreased and the utilities refuse to lower the retail price.
His conclusion is that SA's drift is likely to continue. His solution repeats the Business SA line ---embrace a low-cost/low-wage competitive option. This would involve removing the life tenure and reducing the number of bureaucrats because the public sector and the political influence of public sector unions as a handbrake on economic reform. However, the Weatherall Labor government doesn't have the courage to do what is necessary. Instead it lives on the hope for another resources boom.