Every year when I write about the budget I am bombarded with replies from the community about how badly Labor did when they were in government and about how unfair I am being, in criticising the Coalition Government of today.
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So this year let me take a more straight-forward approach, tease the grey matter and reference certain pages of the budget, that will help everyone to understand my fundamental claim about the NSW Budget – there is a train wreck coming to the NSW bottom line and it will arrive in the next three-to-four years.
The NSW Budget is normally (for the past 20-plus years) handed down in five different booklets. This year there were only four.
Your own personal interests will determine which booklet you are most interested in – and for me, the key to the state finances is in Book 1 – the Budget Statement. Book 1 is the big picture, the long-term view.
All NSW Budget papers are available on-line. Anything that I write and say can be cross referenced and found in the budget papers.
Now over the past six years I have commented regularly about the sell-off of our profit-making assets, things like ports, poles and wires, our Land Titles Office, etc.
Some have told me that my views were “moaning and whinging” and Labor-focused. Some also said that the sell-off was due to the “terrible position that Labor left the state in”.
Regardless of your view, surely we can all agree that selling the profit-making assets means that there will be less money coming in to the budget in future years.
So it is. Budget Paper 1, Chart 2.2 on page 2-4 shows falling growth for future income/revenue. It is nosediving! Since 2015/16 the slope has looked like a ski jump, with no end in sight. That is because all of this income/profit-making assets will no longer return their profits to the state. The state will be growing by less than two percent by 2021 with cost growing by more than three percent at much the same time.
Many have been led to believe that as a result of the sell-off of $50 billion of our state that our debt would be much lower and that this would be good for the state.
Sorry to disappoint. Table C.2 in Budget Paper 1 on page C-3 shows that when Labor left office in 2011 the state level of “borrowings” was $22.5 billion and as at June 30, 2017 it will be $33.02 billion – a 50 percent increase.
And for the next 365 days of 2017/18 the state will pay $5.75 million per day in interest on the $33.02 billion debt.
So we can clearly see the sell-off has not helped pay down debt at all. This is because the sell-off money was forced, by the government’s own legislation, to be used to build stuff, not pay down debt. And as we all know, the building of stuff is happening in Sydney, to a very large extent.
So where to from here? Well, when the money coming in dries up and when the costs of producing services continues to rise, we will be in a real mess.
Selling your home to buy a sports car is what the government have been doing these past six years. There is every chance that the costs of many projects will blow-out and that the AAA credit rating will be at risk (when our debt plus superannuation is 120 percent of the budget).
This is the financial future that is being set up by the current government. Yes, there is a train-wreck on the horizon. But there will be some shiny new bridges and tunnels and a whole bunch less government services.
