Monday, January 26, 2009

Rudd Canes Rees Over Economy

Originally posted 12-Oct-2008 at

Prime Minister Kevin Rudd has given a verbal slap to his Labor colleague, NSW Premier Nathan Rees. Mr Rudd has committed to pumping more than $10 Billion into the economy, including cash handouts to some just before Christmas. He knows it’s a short-term band-aid, but that it will mostly be spent over Christmas, helping to sustain at least the retail sector.

Nathan Rees, as Premier of NSW, is planning to significantly cut State expenditure in a mini-budget expected next week. Mr Rudd, is reported in the Sun-Herald to have said:

“On the state of NSW, I will say it in loud and clear terms: the Government
of NSW has to radically lift its game. … It is necessary not just for the people
of NSW but for the national economy.”

A significant reduction in NSW Government spending will only exacerbate the NSW economy, and therefore the national economy. What Mr Rudd didn’t say, and I will, is that:
  • NSW has had 12 successive budget surpluses, totalling more than $4 Billion. The money has been closeted in NSW Treasury.
  • While some of the surpluses were used to slightly reduce NSW net debt, it is entirely appropriate for NSW to draw down some of those surpluses, or even to borrow, to support the NSW budget over the next 2 fiscal years.
Such use will doubtless upset some Treasury officials - those who are economic rationalists who believe the money belongs to Treasury. It doesn’t, it belongs to the people of NSW, and the NSW Government ought to use it appropriately during economic slowdowns such as this.

NSW has also asked the Federal Government for $Billions to help fund infrastructure programs. Assuming it receives some extra Federal grants, Nathan Rees has an opportunity to use some of Treasury’s reserves, and Federal Government money, to benefit the people of NSW.

That would beat any glossy press release, or press conference full of image and no substance. It would also be a nice change.