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Mr MIKE BAIRD (Manly) [12.07 p.m.]: I speak in response to the budget. As the shadow Minister for Finance, I will raise some of my concerns about the budget. As the member for Manly, I will raise issues that I believe the State budget should focus on in the next term. This budget has been dubbed the "lucky budget". It contains higher than expected investment returns and higher tax revenues. As we have a strong national economy the words "lucky budget" are apt. Headline numbers assume a surplus, but underneath there is a far more murky reality. The surplus is predicated on a number of assumptions: first, that the Federal Government will pay a spurious tax bill of $400 million; second, that we can leave unfunded superannuation liabilities to future generations; and, third, that we can achieve expense reductions that have never before been achieved by the State Government over the past 12 years.
Looking at the budget as a company analysis, we can begin to see the picture. The Government received a tax windfall of $1.16 billion, which included stamp duty of $750 million, land tax of $249 million and payroll tax of $139 million—all windfalls. The Government continues to receive revenues for which it has not budgeted and has averaged more than $1 billion over the past 12 years. That level of revenue is close to matching the total current State debt, which starts to bring into question the impact of this lost opportunity. In other words, would we need to borrow up to $39 billion in three years if we had invested that money in infrastructure in the past 12 years?
In reviewing taxes, payroll tax stands out as the most destructive. Over the past five years it has increased by 35 per cent. The payroll tax rate in New South Wales is the highest in Australia, yet collections are expected to increase by a further 29 per cent, or $1.6 billion, over the next four years. All other States are reducing this rate but the New South Wales Government does nothing other than talk about it. Whilst New South Wales has received nominal cuts to tax rates the material impact is very different. This Government congratulated itself on announcing reductions to land tax, but that reduction must be put into perspective.
Taking land tax from 1.7 per cent to 1.6 per cent means a reduction of $43 million in revenue each year. However, this year the Government received $249 million in unbudgeted land tax. In effect, over the forward estimate period this Government will not even give back the bonus it received this year, so really there is no cut at all. It is time this State Government stopped tinkering with taxes and looked at comprehensive reform. Payroll tax inhibits business and must be tapered out and removed. The Government is patting itself on the back for abolishing nuisance taxes—mortgage duties and stamp duties on hiring, et cetera. However, we all remember that when the goods and services tax [GST] agreement was signed those taxes were supposed to go with it. The Government is congratulating itself on achieving an agreement that was signed many years ago.
The Treasurer awarded a 6.7 per cent pay rise to politicians, who will sit for the least number of days in living memory. I believe he is out of touch with the electorate. I question why I am receiving a pay rise after three months of being in my job. That would not happen in business. People in business have to prove that they are doing a good job and they have to be held accountable. Is it any wonder that there is scepticism amongst public servants whose pay increases have been limited to 2.5 per cent? Members should not be afraid to be held accountable for their performance at the same time as providing significant financial incentives to the public service to achieve efficiency gains. That equation is firmly entrenched in favour of those in Governor Macquarie Tower; it does not favour teachers, nurses, police or public servants, who do a fine job day in and day out.
The independent umpire who reviews pay rise requests for members of this House and for members of any other parliament must consider all those points. An independent umpire must determine whether a government is achieving efficiency gains and whether members are being held accountable for doing a good job for their communities, day in and day out. That must not be determined in isolation or linked predominantly to the consumer price index and other things. Members must be held accountable. As an example, using the shared services paper provided by the Department of Commerce—which was available on its website but which is now hidden—this Government has approximately 1,200 payroll clerks. The report shows that, when benchmarked against the private sector, only half that number of people would be required. If efficiencies are found in these processes and jobs can be done with fewer staff, those who remain should share in the benefits. That would help workers doing the job and it would result in the people of New South Wales receiving tax reductions.
Mr David Harris: What about the unemployed?
Mr MIKE BAIRD: There are other opportunities for them. People should not be employed for employment's sake. If a job can be done with fewer people, that is the process that should be followed. Over the next four years the Government is projecting, on average, a 4 per cent increase in total expenses, despite expenses averaging at 5.9 per cent over the past four years. The Government's track record, which speaks for itself, seriously undermines the budget. If those expenses are applied to the forward estimates potentially we would have an annual shortfall of close to $800 million. We have to question the Government's budget.
This State's balance sheet is strong but I want to focus on one element: unfunded superannuation. Unfunded superannuation might have its complexities but in essence it is simple. The State Government will have to pay a certain amount to public servants in defined benefit schemes upon their retirement. At the moment there is a $17 billion shortfall. That unfunded liability will increase to $17 billion over the next four or five years. The Government took advice from an actuarial report and made some assumptions. Three key assumptions are in its favour. The first is an investment rate return assumption that, according to industry, is at the high end of the market where it should be.
The Federal Government's investment rate return is 7.5 per cent and this Government's investment rate return is 7.7 per cent. This Government used a discount rate of 7.3 per cent, which is out of step with the discount rate of the Federal Government. The Federal Government conservatively uses the long-term bond rate of 6 per cent and every other State government, excluding Western Australia whose rates are unavailable, uses a rate between 5.7 per cent and 6 per cent. Accounting standards demand that governments use a long-term bond rate, which is akin to the 6 per cent being used by all the other States and the Federal Government. This Government—and I am not sure why—uses a rate of 7.3 per cent.
I have asked the Government to release the report and any briefings that accompanied it. This matter is important because the Government is grossly understating its unfunded liabilities. If the Government's liabilities are much higher and it is being prudent in its financial management it must make contributions to attack that gap. If it is not making contributions it is passing off the problem to future generations. Conveniently, under the new report, the unfunded superannuation liabilities are supposed to peak in 2011 or 2013, which is beyond the next election, and it is something we do not have to worry about. If we do not contribute as much as we were contributing, it means that we could use those funds for other purposes. The Government is parking the problem.
Mr David Harris: Like infrastructure.
Mr MIKE BAIRD: Exactly, like infrastructure. I am asking the Treasurer to confirm whether that is what he has done. If the Treasurer used these funds for infrastructure rather than for superannuation he needs to come clean. That is a good example of financial engineering. The Government is deferring an obligation and using the funds for short-term capital gain, which for me is a big issue. The Government must own up to what it has done. The Treasurer, in his opening statement, proudly said, "I want to be known for prudent financial management." That means he will use the dividends today to reduce the liabilities of future generations. Clearly, the Government is doing exactly the opposite. It is taking dividends from future generations to create liabilities further down the track, and it is using them as headlines today.
If that is at the core of this budget I have real questions about it. The people of New South Wales should be given answers to that issue. It is at the core of the credibility of this Government and it is at the core of constituent concerns—constituents that the Government is supposed to be representing. The last issue I wish to raise relates to transparency and accountability. It has yet to be explained why the budget papers this year no longer include details of benchmarks, outcomes, programs or staff. The budget papers for previous years detailed the Premier's personal staff, but that no longer occurs. Details of State programs and benchmarks were included in the budget papers.
We must be able to obtain all those details from the State budget. Governments must be accountable. That information enables the people of this State to hold the Government accountable. It comes back to the productivity of members in this place. If we are asked to deliver a State Plan we should be held accountable. The Government should be held accountable. If it does not deliver the infrastructure that it says it will deliver—the $12.5 billion that I believe is earmarked for this year—no Government member should receive a pay rise the following year.
Mr David Harris: That is why we have elections. People decide that at elections. That is why we got returned.
Mr MIKE BAIRD: I agree. An election win is the ultimate reward for an Opposition that puts up a credible alternative plan. But in the intervening period there must be some accountability. The Government is good at making promises. It is good at highlighting long-term plans and then delivering very little. Remember Bob the Builder? We must have some parameters so that we can hold the Government accountable. If those details are no longer in the budget papers we cannot do that, and members will have no performance indicators. That issue must be considered. On that point I conclude my comments about the budget from a finance perspective. Look under the spin in the budget and ask where New South Wales is going. Our liabilities have been deferred and our debt is increasing. But the Government has received significant unbudgeted revenue. Increasing debt and the failure to deal prudently with our long-term liabilities is a recipe for significant financial problems in this State. I make that point in my first reply to the budget as shadow Minister for Finance.
The budget is silent about the Manly electorate. That is most disappointing for my constituents, and indeed for all on the northern beaches. The Government must look long and hard at transport services on the northern beaches. The Spit Bridge project— The budget is silent about the Manly electorate. That is most disappointing for my constituents, and indeed for all on the northern beaches. The Government must look long and hard at transport services on the northern beaches. The Spit Bridge project—which is also known as the boondoggle project—was never going to happen. The Government took us for a spin. But the Government had a chance to redeem itself by spending the $59 million on public transport on the northern beaches. The Coalition asked for the construction of a grade separation at the intersection of Manly and Sydney roads. We asked for a park-and-ride bus depot at Brookvale to cater for 400 cars and 100 bikes. We estimate that this will take 180,000 cars a year off that section of road, which is part of the solution to this long-running problem.
The Coalition asked for the priority construction of a grade separation at the intersection of the Wakehurst Parkway and Warringah Road. We asked for improved integration of bus and ferry services and for 60 new buses, which will attract people back to public transport. We want more people on the northern beaches to use public transport, but the services must be accessible and reliable. We want fewer people to use their cars. London residents do not leave their homes and hop into their Volvos; they catch the tube, the bus or British rail. We must provide public transport options for people on the northern beaches.
Turning to the environment, the Coalition asked the Government to prioritise closing the ocean outfall. It is a blight on one of the most unique and wonderful parts of the world. Closing the ocean outfall and using the water for recycling is a prudent way of attacking not only the water shortage but the blight on this wonderful place. Manly Lagoon and Curl Curl Lagoon must be cleaned up urgently. The Coalition argued that $6.5 million was needed to clean up the Hinkler Island channel in Manly Lagoon, which has been plugged with landfill for 40 years as a result of a Roads and Traffic Authority decision that has gone very wrong. It is time the Government took responsibility for that decision. The channel must be opened so that clear water can flow through it to prevent stagnation, which has caused significant pollution in the past 40 years.
The Government must take a strong position on North Head and oppose any future residential developments there. The community is unanimous about that. The Government handed the Quarantine Station to private developers but we want it to be included within the North Head Sanctuary. We call on the Government to expedite the timeline for building the northern beaches hospital. We need the hospital urgently, and we ask the Minister for Health and the Treasurer to make the construction of that facility their first priority in the next budget. We need a definitive timescale for the project, which the Government has not yet provided. The allocation of $8 million next year seems a small amount in the context of the entire project. We ask the Government to take the project seriously. Services must be retained at Manly Hospital—which I will talk about this afternoon—until it is closed.
Turning to education, I will highlight three outstanding capital works at three fantastic schools in the Manly electorate. Balgowlah North Public School has made successive applications for a new administration-library block and car park. I am sure that the member for Wyong, who is a former principal, will appreciate the importance of investing in schools and keeping good schools running. Balgowlah North has been waiting seven years for its improvements, and we ask the Government to prioritise that work.
Manly Vale Public School has been asking since 1990 for an upgrade of its administrative block, including a student sickbay. Seventeen years is long enough to wait. The existing administrative block is a demountable, which was supposed to be temporary. The administration block has been on the department's capital works list each year since 1994, but there is never enough money. We ask the Treasurer and the Minister for Education and Training to finally make the money available in the next budget for that fine school. Manly Vale Public School also has significant occupational health and safety issues. Its library must be extended. I have been there, and it is very small. Anyone who loves education will know that the library is a critical part of any school. We ask that that work be prioritised.
Over the past decade Curl Curl North Public School has applied for four to six new classrooms, a new student toilet block, and a new staff administration area, which it is estimated will cost about $3.5 million. In those 10 years the student population has doubled, but the school's infrastructure requests have not been answered. One of the great things about the northern beaches, and Manly in particular, is the influx of young families, who are warmly welcomed. But that influx has put a strain on local schools, which are crying out for new infrastructure. Curl Curl North is a fantastic school, and it needs as much assistance as it can get. Teachers at the school are forced to use the toilet during class time because the existing facility is not big enough for all teachers to use at lunchtime. That is not an appropriate way to run a school.
I highlight the capital works programs at Curl Curl North Public School, Manly Vale Public School and Balgowlah North Public School, and ask the Government to focus on them in the upcoming budget. We are most disappointed that the projects are not in the current budget because the schools have waited a long time. The budget also overlooks sporting facilities in the Manly electorate. Manly Oval has made a grant request for new lighting and Brookvale Oval desperately needs refurbishment.
Ms Virginia Judge: Get the council to pay.
Mr MIKE BAIRD: The council has put in some money and now it is waiting for the State Government's contribution. The Manly Swim Centre requires refurbishment. It is a long-held dream in the Manly area to open a surf museum that will celebrate both surf lifesaving and surfing. We have the memorabilia, and a $1 million grant has been requested. We ask the State Government to make that money available in the Year of the Surf Lifesaver, to preserve the history of lifesaving for future generations.
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