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The NSW Premier and Treasurer must immediately meet with the Prime Minister to allay the NSW Liberal/Nationals long-held concerns that the Federal Government’s bank guarantee would hamper the State’s ability to borrow money for essential infrastructure, Shadow Minister for Finance Mike Baird said today.
“Two months ago the NSW Liberal/Nationals called on the Treasurer to question his federal colleagues on whether the Commonwealth bank guarantee would reduce this State’s capacity to borrow money in a tight credit market*,” Mr Baird said.
“However Mr Roozendaal simply brushed off the suggestion, applauding the bank guarantee as ‘a positive step by the Federal Government to bring confidence into the financial markets’**.
“Well, today we learn the Rudd Government is considering borrowing billions to pass on to the States because the Commonwealth guarantee has made it more difficult for NSW to borrow funds for infrastructure. This confirms the NSW Liberal/Nationals was spot on with its concerns.
“Mr Roozendaal’s failure to grasp the impact of the financial crisis is hurting every taxpayer in NSW.
“There is a good chance NSW will not be able to fund its debt programme because the Commonwealth guarantee means banks will take liquidity out of the market and will also increase the cost of borrowing.
“The simple impact of this is that the NSW economy, which is already under the handbrake of increased taxes, could be further hurt by a reduction in future infrastructure spending.”
During debate on the mini-budget legislation last night in Parliament, Mr Baird reiterated the NSW Liberal/Nationals’ concerns about the federal bank guarantee.
“The Commonwealth Parliament is about to legislate a guarantee for every financial institution in the country. That means that financial institutions will rank ahead of State governments, will take liquidity out of the market and will significantly raise the cost of funds to this State,” Mr Baird told Parliament last night.
“The NSW Liberal/Nationals’ fears have been realised while the State Labor Government has floundered. The Treasurer does not have the capacity to understand the financial crisis or protect taxpayers’ interests,” Mr Baird said.
MEDIA: Lisa Harrington - 0406 726 880
* Mike Baird media release ‘NSW Treasurer Unsure How Federal Bank Guarantees Will Impact State Finances’ (15 Oct 08)
* Treasury Estimates Committee, 14 Oct 08 – page 26 of transcript.
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