NSW State Government – Worse than a Desperate Crack Addict?

In a predictable move, the NSW state government, led by Nathan Rees, has cancelled several major rail infrastructure projects – namely, the North West Metro and the Richmond Line duplication, which has been ‘deferred‘.

These had been promised for many years and are needed to cope with the growing population in these areas. Housing has become highly unaffordable in inner-city Sydney, so people were encouraged to move to the outer areas in the expectation that the these Government transport projects, when completed, would be able to take them to their places of employment in the inner city.

The government of course states that these projects, which they previously claimed to be ‘fully funded’, have to be abandoned due to the budget ‘black hole’ created by the financial mismanagement of the past NSW Labor governments led by Morris Iemma and Bob Carr, and the global financial crisis which has led to reduced tax revenue.

Despite having cancelled these projects, the NSW government is desperate for cold hard cash and is prepared to sell all the public assets they can at any price. The latest assets up for sale are the electricity retailers, NSW Lotteries and Waste Services NSW. These are all profitable and income-generating.

One major reason cited by the state government for refusing to borrow money for infrastructure is that they want to maintain their ‘AAA’ credit rating. Correct me if I’m wrong, but isn’t the whole purpose of having credit ratings in the first place to allow reliable borrowers to obtain loans on good terms?

Now is the perfect time for the government to spend borrowed money. NSW is in recession and the economy needs to be stimulated – capital works projects have been historically effective in these situations.

Reviving the cancelled infrastructure projects will remove bottlenecks and lead to increased taxation revenue and economic growth. As we are are now in a higher inflation environment, the net present value of future loan payments will keep falling, reducing the future costs of servicing these loans.

Furthermore, keeping those public assets will ensure that their income is retained, and this income will of course reduce the burden of loan repayments.

The post NSW State Government – Worse than a Desperate Crack Addict? appeared first on Here's Trouble.

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