New South Wales treasurer, Eric Roozendaal, has delivered a mini-budget that cancels or postpones a range of infrastructure projects and slugs citizens of the cockroach state with a host of new taxes and charges.
Mr Roozendaal claims these are forced on the NSW government by the global financial crisis.
In the first sentence of his speech to parliament last Tuesday the treasurer said, "Today I put forward the government’s plans to keep our financial position strong in the most uncertain times since the Depression of the 1930s."
He went on to blame the financial position of the NSW government on "alarming international events" such as the "American sub-prime crisis", the "bail outs of some of the oldest financial institutions in the world" and "stock market movements more volatile than any time in living memory".
All dramatic words and all very concerning, if the blame were justified; if these were the core reasons NSW is in financial crisis.
The reality is that the NSW state economy - and therefore the condition of the NSW government treasury – has been in strife for some time; since the end of the Olympics to be precise.
I’ve done some calculations comparing the performance of the NSW economy with that of the Australian economy each year since 2001, going on until the end of the 2008-09 financial year. I’ve used national accounts figures from the Australian Bureau of Statistics and projections from Mr Roozendaal’s budget papers. The numbers are ugly.
In each of these nine years the NSW economy significantly under-performs the Australian economy.
On average for this period, growth of the NSW economy lags that of the national economy by 37% annually. Put another way, if the NSW economy had the same growth rate as the Australian economy for these nine years then the state economy would be 10% larger by the end of the 2008-09 financial year than what is projected.
Translated into government revenues, if NSW could have matched the national economic growth rate then the state government’s budget would be substantially improved; by $5 billion in the forthcoming year, for instance; which would be more than enough to fund the government’s services programs and undertake a handsome infrastructure construction program.
Unfortunately, we can’t wind back the clock. The NSW budget is genuinely stressed, whatever excuses Eric Roozendaal advances.
My one sympathy is with the treasurer’s argument that the NSW taxpayer gets a poor deal from the feds, with a sizeable portion of GST payments from NSW going in 'equalisation' subsidies to households in Tasmania, South Australia and the territories.
This is Eric’s muted cry for help. Hopefully the federal government will realise that a revived national economy requires solid performance from NSW. Humbly, NSW residents should hope for generous federal intervention soon.
The chaos that is daily life in NSW has to be resolved.
Professor Phillip O'Neill is director of the Urban Research Centre for the University of Western Sydney.