Thursday, December 8, 2011

An Expensive Ambition

I understand the need to illustrate news stories with photos.  We are visual people, and almost everyone prefers their writing to have some pretty pictures.

There is quite an art to these pictures - the photo needs to go with the story so there is some synergy.  It would jar to have a picture of a happy politician next to a story about how his or her stocks have fallen recently.

Having said all that, the below picture is a fairly ridiculous accompaniment to the story on O'Farrell's repudiation of "commentators" assessment of the value of the "poles and wires":
Photo from the Tele
If this photo was posed, then someone in O'Farrell's office deserves a smack about the head.  He looks ridiculous.

Moving on, the Telegraph has this week continued its campaign for the sale, as is evident from this paragraph:
As it happens, he is right about their being no "magic pudding".  Why he has chosen to describe it as a "magic pudding" rather than a "magic bullet" like any sensible English speaker would is beyond me, but we'll put that aside for the moment.

O'Farrell went on to nominate 4 ways in which the government can raise the money to get stuck into the "infrastructure backlog" left by Labor.
Each of these suggestions merits some further attention.

Realising assets is, politically, an extremely sensitive issue.  I've previously discussed the practical effect, and the unavoidable consequence of union outrage.

Of course the obvious problem is that once assets are sold, they are gone.  If the asset is producing an income, then it is fair to ask whether the state is actually getting value for money.  This is naturally a question that can only be answered by looking at the specific facts and figures for that particular sale.

Federal funding is a vexed issue.  On one hand, O'Farrell's federal counterparts have campaigned heavily against Federal Labor's perceived overspending, so NSW can't complain too much if the belt is pulled a little tighter.  GST flows regardless, but the breakup of the funds is always a difficult issue.

The last time NSW applied for Federal funding the entire matter was botched by Labor's average efforts, so hopefully the Coalition Government will put up a better show.  But it remains a source of funding that cannot be relied on.

Of course, sometimes the Federal government steps in for flagrantly political reasons, such as when NSW Labor promised to build the North-West Rail Link in the lead-up this year's election
Photo from SMH
Growing the state's economy is by far the best option, but also the most difficult.  There are a thousand variables that affect how likely any such effort is to succeed, and those efforts can be derailed by factors far outside the government's control. Additionally, economic growth and the additional tax income it brings also bring with it cost - new residents need public amenities and expenditure on teachers, nurses and the like.

On the other hand, the cash inflow is semi-permanent, it is recurring, and it can be very substantial.

Finally, borrowing within AAA.  The issue of our credit rating has been a recurring issue of late, and the Labor government was roundly criticised not so long ago for its slavish adherence to AAA.

It does make sense to maintain a good credit rating.  The cost saving is significant and it attracts investment.

Like anything else though, someone needs to look at the cost/benefit.  I don't believe that we need to protect the AAA at all costs, and it is entirely conceivable that it may be worth sacrificing AAA to build a particular piece of infrastructure.

At the end of the day, as I have said many times before, O'Farrell said that he wants to be the Infrastructure Premier.  That is a noble goal, and a goal worth pursuing.  But the corollary is that being the Infrastructure Premier is going to take money.  Many, many billions.

It is a very, very difficult promise to keep.

O'Farrell also promised to deliver open government, and multiple departments' now infamous failings in this area have received a great deal of coverage.

That was a promise that cost very little, and merely required a little political will - and yet that has slipped away.

NSW will not allow such laziness when it comes to infrastructure.  It is right and proper that a sensible, measured approach is taken to the projects - we certainly want to avoid another Sydney Metro debacle.

But if a significant number of the promised projects are not moving by the next election (I'm thinking here partcularly of the North West Rail link) then there will be hell to pay at the ballot box.


  1. Well reasoned post. I think spell check has inserted 'colloroy' where corollary was intended.