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Do you support the RTA's proposal for a footbridge across the Spit?
| Appropriation (Budget Variations) Bill 2009 |
| Monday, 30 March 2009 | ||||||
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(b) $10,891,000 for recurrent services in accordance with section 22 (1) of the Public Finance and Audit Act 1983, and (c) $520,505,000 for other additional recurrent services.
(b) $240,010,000 for recurrent services and capital works and services in accordance with section 22 (1) of the Public Finance and Audit Act 1983. This bill is another example of the Government's economic mismanagement. Only five months ago a high-taxing mini-budget was handed down in this Chamber that was supposed to draw New South Wales out of the economic mess in which it found itself. When the mini-budget was handed down Eric Roozendaal said he was going to hunt waste and shred it. Yet the Government is back in this Chamber today seeking approval for an extra $1.4 billion that was neither budgeted nor accounted for. Going back to 2007-08—notwithstanding we had gone through a budget process, an appropriation process and the Auditor-General had signed off on it—New South Wales has $540 million that sits alongside supposed surpluses, which highlights that this Government has lost control of its expenses and that is the reason we are in this position. In the current economic climate the worst possible signal that can be sent to external investors, institutions and the market as a whole is that New South Wales still does not have its financial house in order. Additional funds of $1.46 billion over 2007-08 and 2008-09 show a complete lack of discipline in relation to expenses. I will go into detail about what that means. There is a lack of transparency and, ultimately, accountability because each budget will have within it a treasurer's advance. The Treasurer's Advance is available for recurrent and capital purposes, but it is constantly overrun by this Government. We need to look at the external view of the economic mismanagement of this Government. Why is the level of New South Wales expenses of concern in this bill? For 14 years—from 1995-96 to 2006-07—New South Wales had surpluses that totalled almost $11.3 billion. Many people ask, "Where has it gone? How has it been squandered? What has it been used for?" We had a mini-budget and we now have a revised budget deficit as at 31 December of about $1 billion, and who knows how far it will rise? The ongoing issue is the continuing growth in expenditure beyond the increases in revenue. I know, and we have heard that both the Minister for Finance and the Premier know, that this is a concern the market has with the State Government. The Government's Vertigan and Stokes report, "New South Wales Audit of Expenditure and Assets" found a 5 per cent growth in revenue but a 6 per cent growth in expenditure for the previous four years, and that has been a constant for this Government. The report states that the difference in growth rates of 1 percentage point per annum applied to an annual budget of $40 billion means expenses have increased by $400 million more than revenues each year. In other words, the State has gone backwards by $400 million. The budget is now up to about $47 billion, so it is $470 million if it is run in that context. The respected John Pierce, who has gone on to greener pastures, highlighted that issue. Treasury as a whole is commended for raising this concern and for trying to call the Government to account. In relation to expense management John Pierce told the estimates committee, "If we read the budget papers it is a constant theme Treasury is raising and which we have tried to address". Treasury is telling the Government that its expense management is out of control. Vertigan and Stokes conducted an independent audit of the expenditure of this State, which also revealed that expenses are running out of control. The third leg is that the credit rating agencies have also sounded a warning. In August 2008 Standard and Poor's revised the State's credit rating outlook from stable to negative. Mr Paul Pearce: They're a trustworthy lot. Mr MIKE BAIRD: This was ahead of the impact of the financial crisis. We will hear many comments about its impact on our credit rating and many will try to blame this on the global financial crisis, but we went onto credit watch before its impacts were felt on our shores. That is a fact that the member cannot argue with. Standard and Poor's analyst Brendan Flynn said that there remained a two-in-three chance that New South Wales would retain its triple-A credit rating provided that—and this is the crux—the Rees Government was "going to be able to re-jig their spending like they're planning". The agency said that expense control is a problem for this particular Government and that is one of the key reasons that the credit rating is at risk. Regardless of whether you agree with the ratings agency, the way markets work is that, if we lose our rating, we are going to be up for significant amounts of money that could be used for other services across the State, whether it be health, transport or infrastructure. Mr Barry Collier: Which markets are you talking about? Are you talking about financial markets? Mr MIKE BAIRD: Financial markets, professor. Notwithstanding clear concern from ratings agencies, we have a clear concern from John Pierce in relation to expense control management and we have identified in a Vertigan and Stokes report commissioned by the Government a complete lack of interest in this particular issue. Nathan Rees's approach must be questioned. His approach to economic management is a fascinating little exercise. I will read a few quotes because they need to be put together to follow them. Back in September 2008 when Nathan Rees was made Premier of this State he started off by saying, "Fiscal responsibility will be the cornerstone of my premiership." But shortly after that, when rushing from one Cabinet meeting to the next, he said, "I don't have the time or the inclination to examine why we've got those estimates wrong", in relation to why all of a sudden we were faced with a mini-budget and why the State was ultimately put on credit watch. That is the precursor to what became the mini-budget period. This goes to the heart of the bill because ultimately financial discipline, having the ability to deal with the market you are operating in, anticipating the impacts and putting in place policies that mitigate the impacts on the State that you are governing are critical. We need to understand what Nathan Rees meant when he said, "If we knew then what we know now we would have done things differently". We all remember that; he said it back in February. I am not sure what he was reading or what he was doing—obviously he was getting up to speed. On 15 October 2008, almost a month before the mini-budget was delivered, Kevin Rudd, who is often put forward by those on the other side of this Chamber as being without peer in what he does in relation to everything, made this comment: "Make no mistake—this is the single greatest threat to our economic security in a generation. And it's the most significant upheaval in the global financial system in our lifetime." Another guy, Alan Greenspan, said that we are in a once-in-a-century financial crisis, "I can't believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally". Mr Grant McBride: He oversighted the collapse of the Western world and you are quoting him as an authority? Mr MIKE BAIRD: I am just quoting him as someone who— Mr Grant McBride: A selective quote, of course. Mr MIKE BAIRD: I quoted Kevin Rudd for you. Kevin Rudd was your economic barometer. We had a clear position before the mini-budget that we were heading into the most turbulent economic times that we could imagine. That is unquestioned. Pick any commentator out of the library and they would have said it before the mini-budget. What did we get in the mini-budget? A position where, whatever spin the Premier and the Minister for Finance put on it, we cut infrastructure. We hear a lot about the infrastructure program, which was announced well ahead of any sign of the impending global financial crisis. At the first opportunity for response, using Kevin Rudd's words in particular—"This is the single greatest threat to our economic security in a generation"—what did we do? What did Nathan Rees and Eric Roozendaal do? They cut infrastructure, and raised taxes and charges. This is exactly the wrong response at the wrong time. Every single government around the world was doing exactly the opposite, including the Government's Federal colleagues in Canberra. We really have to start to wonder who is advising the Government. We can see through the words of John Pierce at estimates that Treasury has been trying to get the Government to control its expenses for a long, long time, but it has not been listened to. At the same time Premier Rees told listeners to ABC radio that he was not sure if they have to save or spend. One minute they have to save and the next minute they have to spend. It goes on and on. The Premier has tried to make fiscal responsibility the cornerstone of his premiership. The ratings agencies, John Pierce, and the community at large want better bang for their buck—they certainly want every single dollar spent in this State closely watched—but we seem to have thrown in the towel. If we turn to external comments post the mini-budget, the Business Council of Australia said, "Australia cannot afford to have state governments running fiscal policies that work against growth. Now is the time to abolish lingering state taxes, not to lift taxes", which is what Nathan Rees and Eric Roozendaal did. The director of Access Economics said, "This is just not a recession. It will be the sharpest deceleration Australia's economy has ever seen New South Wales is drowning, not waving, and 2009 will be a long year. Pretty much anything that could go wrong in New South Wales has gone wrong." That is the backdrop against which we find ourselves. In that context, how you can be in a position where you would not want to manage your expenses is really beyond words. We are talking about a basic day-to-day budget discipline, that is, managing revenue and expense growth—that is the premise of it. The Premier effectively has put up the red flag not just to the ratings agencies but also to the market and everyone in New South Wales. He has lost control of expenses and he does not care, which is why today we are debating an appropriations bill that seeks approval for $1.4 billion across two budget periods. The failure of the Government to get its expenditure under control is ultimately why the budget is now in the red. We have to ask the real questions. If there were any form of decency, transparency or honesty from the Premier or the Treasurer, we would ask that they declare not just in this Chamber but to the whole State the true state of New South Wales finances. We saw it in Queensland. The Government went to the market before the budget and made the point very clearly that revenues were falling and, most importantly, expenses were rising. Why is there concern about the true picture of New South Wales finances? We all have an interest. Whatever politics you play, on whatever side of the Chamber you sit, ultimately there is a desire to look after the people of New South Wales in the most prudent, fiscally responsible way. Each budget from this Labor Government is an opportunity to hide the facts and deliberately mislead the people in New South Wales. Rather than attacking the expenses, which has been requested by all the stakeholders I have referred to, we see it as a means to prop up revenue. A couple of years ago the Sydney Airport land tax bill was introduced. It was a great ruse—it just covered the surplus. If it did not exist we would have been in deficit. We have not heard a peep about that bill. We know that it has been going through the court system. No-one knows whether it has been dismissed, but that is the sort of approach that has put us in this position. Rather than cutting some of its expenses, the Government is propping up revenue. What does that mean? It means that we have the position we have today. Unfunded superannuation was subject to one of the greatest ruses that I have seen in State finances in the couple of years that I have been in this place. While every State and Federal government was dealing with its unfunded superannuation in a prudent way, we were not using a discount rate, which was in accordance with the accounting standards of today. The rate was about 6 per cent. Basically every State and Territory was using a rate of 6 per cent or below. However, we used a discount rate for unfunded superannuation of 7.3 per cent. That means we depressed our unfunded superannuation obligations, which means that the Government had to put in less money in each budget. My conservative calculation is that we have put $300 million or $400 million less a year into unfunded super. That is another example of the way the Government has played with the revenue and not attacked a key problem, which are expenses. That chicken has come home to roost. We are not sure where the bottom will be in unfunded super. There is also a real problem with workers compensation. That fund will be under siege; there is no doubt about that. We need to see a response from the Government in relation to workers compensation. What is the Government going to do about unfunded super in this budget? Will it deal with it openly, transparently and honestly, or will the Government again try to manipulate the numbers and hide the problem? The people of New South Wales deserve to see clearly the true state of the State's finances because there is no doubt that we are in a much worse position than anything that has been reported or anything that has been said by the Treasurer or the Premier. If the Premier wants fiscal responsibility to be the cornerstone of his premiership, he needs to come clean. In relation to day-to-day budget management, the Premier and the Minister for Finance, Joe Tripodi, do not have to raise taxes or slash jobs to ensure basic discipline. It is a fact of day-to-day budget management. There may well be times of exceptional circumstances such as when there are complete and utter market dislocations when one-off payments are required. However, as a rule, in exercising budget discipline and day-to-day budget management, expenses should not exceed revenue growth. Those are the facts and that is the way it should be. What are some of the expenses we could cut? How do you run a budget where revenue growth exceeds expense growth? We can look at some of the expenses that should be as plain as the nose on everyone's face. We can start by looking at Governor Macquarie Tower. This is one of the prime office spaces in Australia and indeed the world. In my previous role I had the opportunity to travel to some cities around the world and I can tell members that the lease costs of Governor Macquarie Tower are right up there with some of the most expensive real estate on the planet. Only Nathan Rees and Eric Roozendaal can answer the question: do they think it is in the best interests of the taxpayers of New South Wales that they sit in that sort of space? They are paying close to $1,000 a square metre when a number of large corporates in this city are paying half that for space not far from Parliament House itself. This comes back to the bill because appropriations are about expenses that we have lost control of in the sense that they were not in the original budget, and we are not sure why they were not, and now the Government is seeking approval for them. If the Government wants to attack expenses and bring in a different culture it needs to look at Governor Macquarie Tower and similar office space. I challenge the Premier to go to the owners of Governor Macquarie Tower and say, "Here is your lease. In the interests of the people of New South Wales we want expense growth to be less than revenue growth." Then they can cut some of the expenses that are part of the perks of a long term in office. It is time they went. It is in the Premier's control and the Treasurer's control right now to make some hard decisions and have the entire Cabinet say, "We are going to cut some of that waste." Another thing the Government could look at is Government advertising—$112 million is an incredible amount to spend. If members go through the Auditor-General's report, which was tabled last week by the Public Accounts Committee, they will see it is compelling. If one wanted to look at cutting costs, this is where one would start. The Auditor-General identified several concerns. He said: There was no central record of the total amount spent on advertising as, although the Department of Commerce annually reported media placement costs, there was no requirement for agencies to detail the cost of advertising research, development and production in their annual reports and very few did provide such information. The guidelines were not sufficient to prevent the use of public funds for party political purposes because there were no general principles prohibiting such practices and there were no criteria to help agencies determine whether a campaign could be seen to be party political. Mr Barry Collier: He is an honest man, Jack. Mr MIKE BAIRD: I am not sure that is a good use of taxpayers' funds. When the Minister for Finance and the Premier of this State say they are not interested in basic financial discipline and controlling a budget and they are looking for expenses to cut, they need look no further than Jack. Jack is a classic case of using public money to promote the Government. That is not in the interests of anyone in New South Wales. That is not in the interests of driving infrastructure. That is not in the interests of any hospital in this State. That is where the Government needs to focus its intention. If members opposite were honest with themselves they would know that they can go on and on with the sort of processes that have brought them to this position. Mr Allan Shearan: And you are! Mr MIKE BAIRD: Not really. I could go on a lot longer but I will be brief. I turn now to project control and again there is something wrong in this Government. The Premier says he wants fiscal responsibility to be the cornerstone of his premiership, so he should do something about it. We want someone to embrace it. I remind members of the T-card project, which cost almost $100 million over 10 years and we still have nothing to show for it. There is something fundamentally flawed in the way this Government goes about its expense priority and its project control. I need hardly touch on the Epping to Parramatta rail line, which ended up being half the distance, three years late and double the cost. That is the culture at the core of this Government and it is the reason we find ourselves in this position. There will be times when additional expenditure is required to invest in the future, but that is not what we are seeing in this bill. This bill is very much about a whole range of expenses that have not been identified, and some of them are almost two years old. Imagine any company being in a position where its expenses of $540 million still have not been reconciled. It is beyond belief. My recommendation is that we need to start unravelling the culture of this Government. A change of attitude is needed so that the Government sticks to its budget. There is no sense of accountability or responsibility from any Minister. I have asked a number of Ministers through questions in this House about how they manage their budgets and the responses I received explain a lot. Mr Barry Collier: Responsibly. Mr MIKE BAIRD: I am sure the member for Miranda would be surprised to know that not one of the Ministers takes the time to review his or her budget expenses on a monthly basis. Mr Barry Collier: How do you know that? Mr MIKE BAIRD: That is exactly what they said. Mr Barry Collier: How do you know that? Mr MIKE BAIRD: The member for Miranda is surprised to hear that, as indeed is the whole State of New South Wales. Mr Barry Collier: No, don't misrepresent me. Mr MIKE BAIRD: The Ministers do not check their expenses on a monthly basis. Mr Barry Collier: How do you know that? Mr MIKE BAIRD: Because the answer came back to me and it is outsourced. Expense management is outsourced to the Department of Premier and Cabinet. We have a Minister of the Crown that runs a budget, sometimes tens of billions of dollars, and he or she is not interested in checking on a monthly basis on how that department is running. Ministers let someone in the Department of Premier and Cabinet deal with financial issues, which is why we get overruns in this State and appropriation bills have to be introduced. Every Minister should be asking, "What are contractors costing this department every month? What are our mobile phone bills? What are our property and lease costs? What are our car, fuel and taxi costs?" I give as an example Sydney Ferries. Ministers should also be asking, "What are our credit card costs?" Last year over $1 billion was spent on new cars. This Government should be able to save $200 million to $300 million in the cost of new cars. Mr Grant McBride: What will we do? Cut out ambulances, police cars and emergency services cars? Mr MIKE BAIRD: The Government should cut out the Land Cruisers. Are Ministers interested in the supply chain? Each department has a number of supply chains but how are they benchmarked? Do Ministers know whether their departments are receiving value for money from service providers? Does the Government conduct regular surveys? Mr Barry Collier: Of course it does! Mr MIKE BAIRD: How can Government members say that the Government conducts regular surveys when Ministers do not check their expenses on a monthly basis? Mr Grant McBride: It is done all the time. Mr Barry Collier: You would get an annual report. Mr MIKE BAIRD: The Opposition intends to change that behaviour. Each month a Minister will receive a report and he or she will be responsible for checking every dollar that has been spent. The people of New South Wales want to know that the Government is checking every dollar that is being spent and obtaining value for every dollar. That simple proposition is outlined in the document prepared by the Opposition. We have stated in our document "Planning for Prosperity" that there would be collective Cabinet responsibility for infrastructure and day-to-day budget discipline. We will provide a budget discipline that encompasses not just individual departments but also every financial decision. I question this Government's infrastructure announcements. The Government announced the North West Metro project with great fanfare and amidst a flurry of advertisements, brochures and handouts. Six months later that project was axed. Infrastructure was announced one day and it was costed the next. Earlier today the shadow Minister for Transport referred to an email that was received a number of weeks after the announcement of the CBD Metro. That email revealed that the principals involved in the decision had no idea of the costing. Some of them are asking whether the Government's costing is $1.8 billion or $4.8 billion. Weeks after the announcement of the proposal they are still guessing on the costing. Ultimately, that sort of culture will result in increased costs, a delay in the delivery of some projects, and projects such as the North West Metro will be cut. The Government established that it could not afford the North West Metro six months after announcing that project. When this Government makes an infrastructure announcement it should verify the cost of the project, know how it fits into the forward estimates, and invoke some sort of delivery cost control. None of that has happened in the past. If Minister Joe Tripodi is attempting to cut costs without cutting jobs he should start with expenses in his ministerial office. Almost $2.8 million has been allocated to upgrade a number of ministerial offices. I do not know on which offices it has been spent but I am sure that it will make someone very happy. I argue strongly that this is not in the best interests of the public of New South Wales. An amount of $1.8 million has been allocated for improvements to the Better Regulation Office. I am sure that all members support the need for better regulation but if they asked small and medium-size businesses in this State for their view I am sure they would be told that this State was overregulated. I am not sure what the Better Regulation Office is doing at the moment because during estimates committee hearings it could not provide clear details on what it does. Another $1.8 million has been allocated to that office. A management fee will be paid to the Department of Commerce to maintain a government mobile radio network, which sounds terrific! Only the Department of Commerce could invent something like that. Mr Grant McBride: That is an emergency services network. Mr MIKE BAIRD: Would members prefer it to be paid on management fees or on back-up systems? Mr Grant McBride: I am just saying that that is what it is for. You asked what it was for and I told you what it is for. ACTING-SPEAKER (Mr Matthew Morris): Order! Members will cease interjecting. Mr MIKE BAIRD: I have a problem with the Department of Commerce charging a management fee. That money should be spent on front-line services. Mr Grant McBride: It is for management, like Telstra. Mr MIKE BAIRD: That sort of expenditure could not be justified. I refer, next, to recent by-election costs. It was sad when John Watkins left, but we are delighted with the new member for Ryde, Victor Dominello, who is making a great contribution. Mr Grant McBride: We love him. Mr MIKE BAIRD: We do love him. Recently $750,000 was spent on by-elections because Ministers and Premiers decided that they had had enough. There was also a legal dispute involving the Conservatorium of Music. This Government is involved in a whole range of activities that deserve closer scrutiny. This Government must spend a lot more time in developing a culture for delivering better outcomes in this State. I ask the Premier and the Treasurer to take an interest in the finances of this State, for example, budget discipline and infrastructure costs. Earlier the Minister for Transport referred to a project worth $4.8 billion and he said that that was all the money that was available for future projects. Is the Minister aware that funds can be raised externally to help with infrastructure projects? Mr Grant McBride: We did that. There is an example of that. ACTING-SPEAKER (Mr Matthew Morris): Order! Mr MIKE BAIRD: Because of the current culture this Government has no interest— Mr Grant McBride: You might want to comment on that. ACTING-SPEAKER (Mr Matthew Morris): Order! The member for The Entrance will cease interjecting. Mr MIKE BAIRD: This Government has no interest in maintaining expenses or imposing any form of discipline in the infrastructure process. The rating agencies, Treasury Secretary John Pierce, and the Stokes and Vertigan audit have identified that this State has an expense problem and it is failing to deliver the sorts of services that should be delivered. Is the Government aware that this bill highlights the fact that it is not managing this State's finances, it has lost control of its finances, and it is unable to deliver the services that the people of New South Wales deserve?
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