Interview: Terror Australis
Unions: Graeme Beard's Second Dig
Industrial: The Hell of Troy
Organising: Miners Strike Gold
Economics: The Accepted Wisdom
History: Vicious Old Lady
International: Out of Sight, Out of Mind
Review: War Unfogged
The Locker Room
Getting Away With Murder
The Westie Wing
For the first time in nine years, the Carr-Refshauge Labor Government looks set to deliver a deficit budget this year. After a good run of eight balanced budgets in a row, the New South Wales Budget balance sheet will be in the red.
This provides an opportunity for the State Government. Now that Michael Egan can't announce a budget surplus this year, he has a chance to explain why this is the case and to show that it is not in fact the end of the world to deliver a deficit.
It is true that many of the reasons are linked to Federal Government funding. The $376 million dollars in GST revenue that has been cut from NSW's share represents a direct cut to the Budget. When you consider that last year's State Budget surplus was a modest $43 million, it shows how much is being lost.
But it's not something for Treasurer Egan to slash his wrists over, as he said he felt like doing when he heard about the cut in Federal funding.
Instead Egan has moved on and has prepared a mini-Budget to outline which Departments will have to find savings over the next year. An upfront approach is best when there's a bitter pill to swallow.
Part of the explanation of why the Budget will be in deficit has to be that it was unavoidable because of the nature of the fiscal cycle. Once that is accepted, then it seems the spirited arguments against deficit budgeting become a bit hollow.
It's proper for a Labor government to say that it is not prepared to sacrifice essential services just so that a Budget surplus is achieved. Michael Egan is saying this about "frontline services"- health, education, transport and policing- but we should not be stopping there.
It's all about mindset. Governments currently underwrite liabilities and losses of private companies when it's necessary. Now it's time to expand the underwriting of public expenditures.
There has to be a bit of vision and verve in the fiscal approach. It has to be accepted that firstly, surplus budgets are not always achievable and secondly, they are not the be-all and end-all. All treasurers know that they are locked in a long-term cycle of finances, which can be tinkered with but not turned around completely.
We're at a point where we have come full circle. Economic rationalism has gone so far that it is now imperative to buy back the farm or at least set up a new one.
When the farm was sold off, the proceeds were quickly plundered to balance the books and a bit further down the track, the private sector refuses to offer adequate services where effective public services existed.
Now is the time to make bold decisions on infrastructure and not be scared of debt.
It may seem like the worst time to consider ideas that are usually labelled "radical". The saying goes that from crisis comes opportunity.
Cost savings over the medium term could be achieved if the Government re-entered areas like the insurance market with an insurer of its own to offer cover in the many areas where the private insurers are inadequate.
It wasn't so long ago that we had cost-effective services like the Government Insurance Office, set up by a Labor government in the 1920s, before Nick Greiner sold it off in 1992.
With a bit of imagination like this, it would matter even less that the Budget is in deficit because a realistic long-term plan would be in place to deliver the infrastructure and social justice programs that a Labor government should provide.
In the long run it's not only electorally popular, it's also economically responsible.
For more information on the Budget process, go to http://www.ianwestmlc.com.au/westieminster.html.
I am interested to hear feedback and ideas--you can contact my office on (02) 9230 2052 or email me at [email protected]
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