NSW budget 2016: steady Baird plans for rainy tomorrow

It’s just a river, the Tweed. But the differences in the state of public finances between the two adjacent states, NSW and Queensland, mean that that waterway is deeply symbolic.

Here are two states with significant infrastructure needs. With disciplined control of expenses and shrewd disposal of government-owned assets, either by sale or lease, NSW is well-placed to meet those needs and easily retain its AAA credit rating.

There is effectively no net government debt in NSW at the moment and even at the end of the forward estimates, net debt will amount to only 3.7 per cent of gross state product.

NSW will record a thumping budget surplus of $3.7 billion in the coming financial year, which is higher than was expected last year. Revenue from stamp duty on properties has surged, boosting the bottom line.

But rather than assume that the rapid growth of stamp duty income will continue, the NSW budget assumes a relatively modest growth of 2.4 per cent a year over the forward estimates. The Baird government does not make plans to spend what it doesn’t have. In each year of the forward estimates, revenue is expected to grow by more than expenses.

By contrast, the state of public finances in Queensland is parlous and it is not disguised by shifting debt from the general government ledger to the balance sheets of the government-owned corporations or raiding the public servants’ superannuation fund. There is just no room for any significant investment in infrastructure in that state, a situation made worse by the continuing excessive growth of employee expenses (7.3 per cent in 2015-16; the equivalent figure in NSW was only 3.9 per cent.)

Mind you, there is another compare-and-contrast case that makes for interesting reading: NSW versus Western Australia. On the back of the mining boom and the income from royalties, the WA government spent as if there were no tomorrow.

Money was splashed on schools and hospitals to the point that recurrent expenditure per student or patient is almost 20 per cent higher than the national average. And a massive infrastructure program in Perth and the regions was initiated.

Sadly, for the Barnett government, there clearly is a tomorrow, with a thumping deficit being recorded in this year’s state budget — almost $4bn. And net government debt will go from $23bn in 2014-15 to $40bn in 2019-20, an increase of 74 per cent.

It is noteworthy that both the Queensland and WA governments have an aversion to selling government-owned assets.

To those critics who say the Baird government is too cautious and conservative in its management of the budget, I say take a look at what happens when states go for broke by overspending on recurrent functions and borrow up big to fund infrastructure.

It’s not as if all the infrastructure projects can be undertaken at once and it makes sense to be sure the money is in the bank before it is spent. By exploiting the hot market for brownfields infrastructure assets, the Baird government has made sure there is plenty in the bank.

We know who won the race — the tortoise beat the hare.