Mon 29 June - As the Budget session draws to a close many have asked me what I thought about the Budget and whether we are in more trouble than we are being told? In simple terms the good news for the State was that the AAA rating was retained but this looks at risk in the longer term, and the forecasts look nigh impossible given some of the assumptions.

The latter point is important as excluding Kevin Rudd’s stimulus payments, NSW has an underlying deficit position of $8 billion over the estimates period. In other words, this is the best case scenario and I remain concerned that the recovery is pinned on an "expense saving" plan that lost credibility day one when Budget advertisements were rolled out. If expense savings are not achieved and forecast economic growth does not eventuate, we could have an ongoing underlying deficit of $3-4 billion and no plan to recover.

With this background it is hard to understand why the Government was so keen to pat itself on the back. The problems remain buried and there is no attempt to address them until an election year .... hmmm. The unfunded superannuation remains a case study in not dealing with the problems. Despite blowing out to $34 billion from $17 billion, the Government has not increased contributions and instead deferred a review until after the Budget ... Nice ... rather than do what is responsible they have deferred it, to deflect attention and importantly to try to present the underlying deficit in a more positive light.

At the same time unemployment is forecast to increase by up to 70,000 jobs in the next two years and NSW has been confirmed in recession.  So with many levers moving against us, we have not tackled the problems head on ... The runaway expenses have been left unchecked for two years and the tsunami style blow out in unfunded superannuation is swept under the carpet. The problem is that this approach is like trying to hide an elephant in your living room under a rug.

So despite the rating being retained it is hard to give the Government a pass mark with the future shrouded in dark forecasts and long term problems pushed out further. The absence of the Northern Beaches hospital and a long term spit solution dampen local views, despite many promises over the past 10 years.

With the Budget week past I am going to take some study leave and head to Harvard to spend 3 weeks on their "Public Finance" program. It is a unique opportunity and given the problems to come, I am hopeful that some global case studies of best practice in budget management may prove helpful in the months ahead.

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