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Mr MIKE BAIRD (Manly) [12.52 p.m.]: I lead for the Opposition in debate on the State Revenue and Other Legislation Amendment (Budget Measures) Bill 2008. What is loosely termed a "mini-budget" is in many respects a case study of all that is wrong with this State. The Opposition opposes the bill because that will give members opposite the opportunity to admit it is time they were held to account for their actions. It is time their actions were open to public scrutiny, and it is certainly time that the people had a voice on issues such as school travel. Today we give Labor members that opportunity, and I plead with them to listen to their communities and to respond through their vote on this legislation.
In the lead-up to its announcement the Government said that the mini-budget was going to be tough and bleak but would turn around the fortunes of this State. I think Kevin 07 would be upset with the outcome because the mini-budget does nothing more than pull out the biggest packet of bandaids this world has ever seen. The Government is trying to hold together a creaking fiscal framework but lacks the budget discipline and strategic vision. The Government claimed that the mini-budget was a response to the global economic slowdown—which is the greatest myth ever perpetuated. Indeed, any member who has sat around the Cabinet table for almost 14 years and paid any attention whatsoever to finance issues knows that this problem has been coming for a very long time. It is unreasonable and baseless to claim that the mini-budget was handed down because the Government had to make some tough decisions in light of the global economic crisis.
The global economic crisis is here but, as we debate this bill, we see clear evidence that the financial crisis in New South Wales has been approaching for a long time. Under the naked glare of economic slowdown, the truth is there for all to see. So how do we reach the point strategically where a government must bring down a mini-budget? What do we do when there is a global slowdown? Every other government globally and Labor members' friends in Canberra are providing funding and introducing measures to stimulate the economy. The Federal Government has provided bonus packages, which come into effect this week, to stimulate the economy. In this mini-budget the Premier and Eric Roozendaal are swiping the money through charges even before it hits the bank.
Let us consider what the Government is doing. Through the mini-budget the Government has introduced 16 new taxes and charges worth more than $3.3 billion and implemented a raft of funding cuts in a last-ditch attempt to shore up the management practice that has been instilled in it. Labor has a culture of no discipline and no accountability. So we now find ourselves in this position at the worst possible time. The Government is not putting simply a handbrake on the economy; it has both feet on the brake pedal. It is slamming the New South Wales economy when it needs every last breath. We must resuscitate our economy and prepare for what is to come. Forget the next 12 months; I believe the next 24 months will be some of the toughest we have seen. I started my career in the finance sector in the late 1980s at the beginning of the recession that Paul Keating said we had to have. I remember clearly that they were tough times for businesses and for families, but that was nothing compared with what we will see in the next 24 months.
Over the past 13 years we have seen windfall taxpayer revenue of $17.5 billion. That is an important point. Every Labor member would be unbelievably excited if the new Premier came into the party room and said "We've had a whole range of windfall revenues totalling $17.5 billion that we have put aside to deal with any economic crisis that comes along." If that had happened we would not have seen cuts to infrastructure projects in this mini-budget. The north-west metro project, for example, would not have been cancelled. If it had basic management discipline the Government would be able to deliver for this State. Upon his appointment, the Premier said he had "no explanations of how State finances had rapidly deteriorated since June." He continued:
I don't have the time nor the inclination to examine why we have got those estimates wrong. The simple fact of the matter is we've got them wrong.
That is understandable during the whirlwind of assuming office as a result of a few backroom deals. We understand that the Premier would need time to consider all financial impacts. But he sat at the Cabinet table for almost two years. Every Cabinet Minister should have asked about the State's finances and whether Ministers were being held to account for the expenditure in their portfolios. That basic discipline is lacking. The state of the economy should certainly not have come as a surprise to the Premier, or to anyone in the Cabinet room. Surely alarms bells should ring and lights should flash when a backbencher or a Minister hears grand announcements and sees advertisements and brochures heralding a new piece of infrastructure. Surely some Government members should have started to question the process when every project announced was cancelled a couple of years later—or in record time in the case of the north-west metro.
The New South Wales Auditor-General, Peter Achterstraat, said that lessons learned from this experience could be applied in the future. He said, "If you are going to put forward a budget, it has to be rigorous." They are very true words. I will address some responses to the mini-budget and I will raise key strategic points. I will conclude with the Opposition's views on what the State should do to move forward. Policy and visions have been much criticised. The Leader of the Opposition and the Leader of The Nationals have a clear plan for taking the New South Wales economy forward, and I will conclude on that point. Once I have addressed the provisions in the bill I will outline some hope and vision. I remember reading articles by Ross Gittins when studying for the Higher School Certificate some 20-odd years ago; he was essential reading then and remains so today. He is a well-respected economic commentator. He wrote:
This mini-budget will impress no one and win the Rees Government no friends.
It will do nothing to ease the severe downturn in the NSW economy. Indeed it will make things a little worse.
Sensible treasurers don't cut spending and run down staff levels as the economy teeters on the edge of recession.
Similarly, they don't jack up taxes in the middle of a downturn.
Nor do they throw out capital works projects at a time when the state's construction industry is most likely to be short of private sector work
It is hard to disagree with Ross Gittins synopsis of what many astute observers and commentators are saying about this bill. Citibank, a global financial institution, commented on the mini-budget and it also provided some good insight. Just after the release of the mini-budget, a statement from Citibank said:
The NSW mini-Budget detailed a significant worsening of the 2008/09 State budget position The obvious concern here is that the higher tax rates will not raise increased revenue, but simply place more downward pressure on these sectors of the NSW economy—
that is, the sectors that most need it—
It seems highly unlikely, therefore, on current assumptions that the projected return to surplus in 2009/10 will materialize.
It is highly unlikely. A raft of forward estimates was announced in the mini-budget, but they come and go with the wind, particularly in relation to a surplus. My favourite was when the Government rolled out the land tax bill at Sydney Airport. The State was in deficit by $370-odd million, so it introduced a $400 million land tax bill, which took it into surplus. There is a high degree of concern about the forward surpluses. I was in the Chamber when the Treasurer said, very confidently, that in 12 months we could be heading back towards a surplus. I do not know where he gets his advice from, I do not know to whom he is talking, but I know that this process has a long way to go. Anyone who attempts to kid us that we will be in a comfortable financial position in 12 months, as the Treasurer says, is being highly optimistic, is not very well informed, and is certainly not taking into account what global commentators are saying. The Citibank statement further said:
The govt has also sharply revised down its economic forecasts we see the revised NSW govts economic forecasts as being too optimistic.
I think economic growth is at 1.25 per cent. In the last quarter, the New South Wales economy was in negative growth. We need a stunning turnaround in our growing economy to achieve that figure. I am sure that Treasury has done the modelling, but the clear question to be asked is: Having gone through the rigour of a mini-budget process, has the Government levelled with the people of New South Wales on what they are facing? Are the numbers put forward just numbers, or do they reflect the true position? The Coalition and others are concerned about the growth forecasts as articulated by Citibank. The statement continued:
Net debt of the total State sector is now f/c at $A27.8bn, 7.4% of GSP, as at 30 June 2009. By 30 June 2012 net debt is now f/c at $A40.6bn, 9.3% of GSP.
Citibank's point is that after all the effort that went into drawing up the mini-budget, the net debt profile for New South Wales in the forward estimates period will barely change. That is not a position that the Coalition would necessarily argue against: the mini-budget has had very little impact on debt profile. The rating agencies have articulated that the net financial liabilities are of concern, and the Government has not done much to alleviate their concerns. Why are we at this point? We are at this point because the ratings agencies put us on credit watch because they were concerned about the forward debt profile and the track record. I will address the ratings agencies in my conclusion. Citibank also said:
State-govt/CGS spreads, especially for NSW, have re-widened in recent weeks.
Unfortunately, due to the ongoing concerns in global financial markets and factors specific to NSW, we doubt that this widening process is complete.
The market is very clear: the spreads on New South Wales bonds are a reflection of management competence. A share price in equity markets reflects a whole range of things, including, obviously, future growth forecasts, debt levels and, most importantly, management competence. The market has concerns with the management of New South Wales, and that is what is seen in the spreads; Citibank sees that as increasing. There are concerns that the forward debt profile, which I will address later, shows the cost of funding New South Wales is rising astronomically relative to the past. It is true that the global financial crisis has hit that point, but, as Citibank has articulated well, there are specific concerns about New South Wales.
The object of the bill is to give effect to certain budget measures announced by the Treasurer on 11 November 2008. They include amending the Duties Act 1997, amending the First Home Owner Grant Act 2000, and amending the land tax legislation to allow the increase of land tax from 1.6 per cent to 2 per cent for property valued at more than $1.8 million—I will address that further. Additional budget measures include amending the Children and Young Persons Act to enable licensing fees to be charged to childcare operators, amending the civil Procedure Regulation 2005 to increase the daily fees payable for hearings of civil proceedings, and amending the Human Tissue Act 1983 to enable to Government to charge for the supply of blood.
Further budget measures include amending the Management of Waters and Waterside Lands Regulations to increase the annual fees for mooring licences, amending the Mining Regulation 2003 to increase the base rate of royalty payable for coal, amending the Parking Space Levy Act 1992 to increase the parking space levy, amending the Growth Centres (Development Corporations) Act 1974, amending the Private Hospitals Regulation 1996, amending the Real Property Regulations 2008, amending the Victims Support and Rehabilitation Act 1996 to double the compensation levies payable by convicted offenders, and amending the Protection of the Environment Operations (Waste) Regulations 2005 to increase the waste contributions paid by occupiers of licensed waste facilities.
What does that mean? How is that translated into tangibles? I will address some of the measures that will flow from amending the legislation and regulations. The Coalition has put the global financial crisis in context. We understand the management performance of the State Government. We understand also the history of specific actions and the impacts of intervention on the economy. When Morris Iemma became Premier he said that he would abolish vendor tax because it put the brakes on economic activity. Morris is no longer with us in this Chamber, but he is still with us in the community. I wonder about his reflection on his experience of being Premier, and what he would think of this mini-budget. Others could ask him that. I am sure he would regret it very much, having seen the effect of the vendor tax on the economy. What would he think about some of these taxes and cuts set out in the mini-budget?
Revenue items include deferring the abolition of certain duties to 2012, which will raise $400 million. I understand that New South Wales has to seek the approval of the Commonwealth Government to do that, but when we took the GST we took it on the understanding that we would abolish duties. Every other State government has done it. New South Wales has deferred its obligations, or is seeking to do so, in its dash for cash.
Everyone was happy to sign up to the GST reform. We have heard a lot of triumphalism about the new federalism and what cooperation will bring to New South Wales. The GST agreement is a wonderful opportunity to secure the funds we have been looking for for so long. While the Government has been tardy in abolishing some duties the broader picture remains of a fiscal imbalance, which we urge the Government to address as a priority and deliver on it.
The premium rate of land tax on properties valued at in excess of $2.25 million will bring in $170 million a year. This strikes at the heart. Why was that level picked? Cabinet members thought that in instituting this tax no-one would feel the pressure. They thought only a group of wealthy people would own these sorts of properties. They did not understand the unintended consequences of the knock-on effect on the many small businesses that operate in the properties held by landowners in this land tax bracket. Who do members think will have to pay for this land tax impost? Obviously the small businesses will have to pay. The landowner passes on the cost to the small businesses and they pass it on to the consumers. It has a double impact because it hurts businesses and it raises prices for the people of New South Wales. It acts as a natural deterrent by limiting shopping and stimulatory activity. It is the result of a blatant attempt to hit a few people in the hope that no-one will notice.
The Government must think through those impacts when it is putting together an economic framework and a clear strategy to take the State forward through the mini-budget process. The Government must think through every single consequence of its actions. It very clearly missed that when it increased land tax, and any distortion will come home to roost. You cannot attack just one part of the property market: the flow-on effect hits every part of it. The flow-on effect impacts on rents, on property values and on tenants, and so the story goes on. Again, this is anything but a stimulatory event for the New South Wales economy. In fact, it is the absolute opposite at every level.
The Children and Young Persons Act is to be amended so that families will now have to pay increased childcare fees, which will raise $7.2 million a year. The shadow Minister has raised a number of concerns about the funding scheme for emergency services. We are looking for $30 million for improvements for the State emergency services. Is that to be paid for by cuts in the services? Only the Minister and the Premier can answer that. We have spoken about the proposal to charge for the supply of blood, which has received a lot of attention for a small item, but it is very symbolic when one thinks of the number of people who voluntarily donate their blood. Blood supplies are critical day in and day out to maintaining and saving lives, yet their supply is viewed very callously as a revenue-raising opportunity by a government in crisis.
Mineral royalties are another example of where we think that strategically the Government has got things very wrong. The Cabinet or the budget team—I am not sure who was in charge of the team; a whole cook's cabinet put the mini-budget together—realised there was a commodity boom, which meant an increase in the coal price in particular. Rather than see those profits go back to the coal companies the Government saw a chance to grab some of them. "Good idea", said the hollowmen who were involved. I ask members to think about the impact of the coal industry on the economy: It provides a huge number of jobs and a high level of revenue through royalties. We have been going through a commodities boom over the past seven or eight years, but everyone can see that an economic slowdown is coming. At present commodity prices are under pressure and falling, so just at a time when companies are starting to feel the pinch and are adjusting their businesses accordingly the Government has decided to whack them by grabbing some more revenue.
The more important point—this is the point I stress—is that a government that is serious about developing an economy should not pick up bits of revenue here and there. How can the Government create a sustainable revenue stream that drives economic growth in the future? It does not slug the entire mining sector, particularly the coal industry, with a levy; it asks ask how the industry can be further developed. I will tell the Government how it can start: It can start with the Newcastle terminal. The Greiner report brought together every single operator and provided a road map on how to finally remove the capacity constraints in that port. If the capacity constraints are removed a lot more volume will end going through the port. That means an increase in revenue to the companies involved, which, importantly, will flow back to the State. Billions of dollars of revenue are available through royalties if the Government can fix the capacity problem at that port once and for all. Would that not be a better strategy than having a very small swipe at an industry that has certainly enjoyed some good times but that is very likely to go through some very poor times in the next 12 months? We strongly urge the Government to fix that constraint problem for good.
The mine-budget imposes a parking service levy, which will raise another $58 million. The Government is cutting back on public transport and in forcing people back onto the roads it will tax them wherever they go. Again, no thought has been put into this. Where is the investment in public transport in this mini-budget? The experience of Manly residents is that there is nothing by way of investment, only cuts. Ferry fares have been increased and the JetCat service has been cut. However, I am pleased to see that the service is to be opened for public tender. The Independent Pricing and Regulatory Tribunal [IPART] has commented on ferry fare increases and given the Government an opportunity to address some of the problems. Sydney Ferries has been plagued by, and saddled with, a cost problem for the past five or six years. IPART has referred to that; it is not just the Opposition. If the Government addressed some of the cost problems it could reduce the subsidy provided to public transport and reduce congestion on the roads, and the whole system would start to work.
The cost of green slips will rise again, which is a slug for working families across the State. I am sure many members will refer to the co-payment for the school student transport scheme, so I will not go into detail on that. I believe the public has spoken on that. My colleagues will certainly speak about it at length.
When we look at the position the State is in, we should remember that the notion of fiscal targets was introduced by Bob Carr and Michael Egan, overseen by Morris Iemma, who started to change it, and dismissed as a nonsense by Eric Roozendaal. Why did Michael Egan adopt a strategy of reducing debt? Everyone would agree that we reduced debt by too much. Certainly investment should have been made in a whole range of infrastructure well over a decade ago. If we look at Melbourne and Sydney and compare the road and transport initiatives we see that Melbourne is far more productive, much easier to get around and more liveable. In fact, on the world index, unfortunately for us, Melbourne has surpassed us as a more liveable city. It invested in infrastructure and we did not. The important thing is how much debt was paid back. There was some sense to what the Government did in paying back debt. It related to fiscal targets. The Government's stated reason for the fiscal targets was:
to strengthen the State's balance sheet by reducing General Government Sector net debt and other financial liabilities to sustainable levels. Once this is achieved, in the event of a recession or a major cyclical downturn in revenue, the Government could meet the revenue shortfall by borrowing, thereby allowing the balance sheet to temporarily absorb the impact rather than having to reduce service delivery.
The 2007-08 budget strategy stated:
The objective of the Government's medium-term fiscal strategy is to maintain service delivery notwithstanding economic and fiscal shocks.
We can blame Costa and Iemma or the Cabinet—no-one wants to take responsibility—but the truth is if we had maintained the fiscal targets established by the Government we would quite clearly be in a position to absorb the economic downturn into which we are falling. That means that we would be able to cope with falling revenues and we could borrow on a short-term basis to provide stimulatory packages to the economy. That could include committing to infrastructure along with other measures such as port capacity. The Government has not included those measures in its mini-budget, which is why this State is in a financial crisis.
The Government is proposing to sell off a number of assets, for example, electricity—an issue to which I will refer in a moment—New South Wales Lotteries, WSN Environmental Solutions, the personalised number plate business of the Roads and Traffic Authority [RTA], and the Pillar Administration. Apart from the proposed sale of the Pillar Administration and the RTA's personalised number plate business, that was the Opposition's policy before the last election. Is the Government considering any asset sales under current market conditions? At the moment it would not be able to raise any form of revenue from asset sales as equity prices have been materially diluted. I call on the Government to give us a reasonable time frame for the sale of those assets, to be transparent in its valuations and the impact they will have, and to inform us of the use to which it will put those funds.
We have spent much time debating the sale of electricity in New South Wales and I will again refer to that issue. At the time of the debate the Opposition rejected the Government's proposed sale for three reasons. The first related to trust. The current administration proved over a long period that it could not be trusted to deliver long-term projects or to oversee a transaction of that magnitude and complexity. There are sound reasons why that proposed transaction made no sense. We are no closer to an emissions trading scheme today than we were a few months ago when we debated this issue. The private sector, industry and bidders have told us it is impossible to place a valuation on those assets. One bidder to whom I spoke revealed that he had 32 different scenarios relating to the proposed emissions trading scheme.
How much would bidders pay for the assets at which they are looking? No-one can place a value on those assets until the emissions trading scheme has been defined and compensation payments to generators have been articulated. If that happens—it might not be until the middle or the end of next year as we are awaiting the Federal Government's determination on this issue—we will reconsider this issue. The Opposition did not rule out private sector involvement. It said it was open to private sector involvement but, at the same time, it was concerned about these issues. Market conditions have not improved; in fact they have materially deteriorated. If the Government implemented its strategy at this point in time people in New South Wales would be diabolically concerned.
It should be remembered that until we received the report of the Auditor-General no reserve price had been placed on any of those assets. No-one knows what those assets would have been sold for; I am sure they would have gone for a song. The Opposition is committed to holding off on the sale of assets at this point in time. I refer, next, to the proposed electricity plan of the Minister for Finance. It appears as though that project is his baby. John Pierce has been lost in this mini-budget process. It is right for the Government to nominate John Pierce because of the role he played in overseeing this State's finances for governments of all political persuasions. Clearly, John Pierce, Morris Iemma, Michael Costa and the private sector rejected this proposal.
The Minister asked a number of companies whether they would be interested in bidding on some of the assets and they gave the proposal a tick because they believed that that was the best they would get. If they start to bid that is better than nothing. During estimates committee hearings John Pierce said that the Government's proposal was the second best option. We are settling for an option that is less than acceptable to the State. Why are we rushing into proposals such as these? Throughout debate on electricity privatisation we referred to three important issues. We wanted to confirm that new baseload generating capacity would be provided outside the domain of this State budget.
Will the Minister guarantee that new baseload generating capacity will be available under this plan? I am sure that the Minister's answer will be that he cannot make such a guarantee, which must send shivers down the spines of everyone in this State. If the Minister cannot give such a guarantee we will have to resolve a huge problem. The Minister referred in debate to risks. Obviously, the price of electricity and energy input are some of the key risks involved in the sale of State assets. Under the gentailer option those risks remain. This Government can document those many risks, but once all those risks are removed it will not know what bids it might get from the private sector.
The Government might arrive at a contract price but, because of its very nature, the electricity price risk will remain. If there is a cut in electricity supply the Government will pay penalties because of market conditions. There are also ongoing capital requirements. How will we escape from investing in our generators? It is pretty simple. All the capital requirements are included in the Minister's proposed gentailer model. The State Government will be responsible for maintaining all those generators for the next 10 or 15 years. In the forward estimate period we saw the opposite—$800 million or $900 million was cut from the Government's proposed investment to upgrade those generators—a disastrous course of action. The population in New South Wales has grown by about 800,000 people, or an increase of 11 per cent.
In the time that this Government has been in office it has not invested in any new generators, and that cycle is continuing. The Opposition is concerned about many issues and it looks forward to debating those issues. Unfunded superannuation is another matter that has been raised by the Opposition over a considerable period. The Government has manipulated assumptions in its previous budget and it has used actuarial rates that are almost laughable in the current climate. Investment rate return assumptions increased from 7 per cent to 7.7 per cent. The discount rate increased from 7 per cent to 7.3 per cent, but that rate has started to move back. At that time the Opposition said that the rate was well above the rate in every other State in this country.
The Government then depressed unfunded superannuation and increased pensioner mortality rates. This is having an impact on populations throughout Australia, but not on the population of New South Wales. The Government manipulates the numbers, forgets about the long term and focuses on short-term results. The Government is creating problems that it wants other people to deal with. It will be in office for the next two to three years, so it does not have to worry about them. That sort of management practice will come back to haunt the Government in this current economic crisis.
The mini-budget revealed that unfunded superannuation, even by old accounting standards, had blown out by another $7 billion. Nothing in the mini-budget addressed increasing contributions to unfunded superannuation. The mini-budget has had a twofold effect. The Government has to deal with the problems of today but it also has a responsibility to deal with the problems of tomorrow. This Government specialises in ignoring tomorrow for the benefit of today, which has resulted in our current financial crisis.
Pursuant to standing orders business interrupted and set down as an order of the day for a later hour.
Debate resumed from an earlier hour.
Mr MIKE BAIRD (Manly) [8. 14 p.m.]: This debate was interrupted quite a while ago, but good things are meant to last and I have plenty to talk about. Anyone who has considered the problems with the State budget and listened to the economic commentators would have been alerted to the fact that New South Wales does not have a revenue problem. I agree that revenue is softening and that it is affected by the global economic downturn, but the main problem is that expenses have been running out of control for almost 14 years. We have spoken in this House about the Vertigan and Stokes audit, which was commissioned by Morris Iemma to examine the State's finances. The audit found that since 2000-01 the average growth in expenses has exceeded the growth in revenues by one percentage point. In other words, over the past five years total expenses have risen faster than the growth in the economy and we have been going backwards by almost $400 million a year in real terms. This has led to marginal—if any—surpluses.
At present we have a significant deficit that has been driven by a lack of expenses, which ironically even the Premier has acknowledged. Let us calculate the projected expenses growth after all the cuts in the mini-budget have been made. Before the mini-budget the figure was 4.5 per cent and after the cuts it is 4.9 per cent. Revenue has crept marginally ahead of expenses in that context, but expenses rose following the budget that was delivered just a few months ago. We cannot argue that there is a systemic problem. Robert Carling summarised that point when he referred to:
"the fundamental and long-running problem of too much spending for too little public benefit. This budget crunch has been festering for years. The facts challenge the conventional wisdom that the Carr government was tight-fisted, let alone its successors. A pattern of high spending goes back to the 1990s. The reputation for restraint that survives from that era is a myth."
The long and short of it is that this problem has been coming for a long time. The Government was aware of it as a result of the Vertigan and Stokes report. My big disappointment is that in this mini-budget the Government has failed to address the fundamental reason that we are in so much trouble in relation to expenses. The point about surplus land involves a range of issues. Clearly we do not want to be in the position of selling long-term assets to solve our short-term deficit problems—that is, using capital to fund recurrent expenditure. If we reach that position we will all be in trouble. On the subject of selling surplus land—notwithstanding the Opposition's clear agitation in relation to the sale of land at Hurlstone Agricultural College and Seaforth TAFE in my electorate—how did the Government determine the land values?
During the estimates hearings I was amazed to hear that the State Property Authority, which is our articulate expert in this area, did not have any input in determining the valuation of property. The critical amount of more than $800 million is attributed to these asset sales but we have absolutely no verification of that figure and the Government's property experts have had no involvement in the process. I ask the Government: Who arrived at those valuations? Can they be trusted? What does the State Property Authority do if we do not entrust it with assessing the critical elements of assets going forward?
As we have been caught in the financial crisis, it is remiss not to highlight again our concerns about the way the Government has dealt with councils. Treasury took a position in relation to the collateralised debt obligation risk, but did not pass that on to the councils. In November the Auditor-General said, "TCorp has not invested in Collateralised Debt Obligations and has not suffered any loss from direct exposure". In October, the head of the New South Wales Treasury, John Pierce, admitted that the New South Wales Government decided "very early in the piece" to stay away from risky investments linked to the subprime mortgage crisis. The Cole report started to address those concerns but did not go far enough. It revealed that councils had suffered market-to-market losses of approximately $320 million. Why did New South Wales Treasury, the architect of the investment guidelines for councils, not pass on the information to councils? That is a huge unwritten scandal because every council in this State has suffered millions of dollars in losses. The people who wrote their investment code forgot to give councils critical advice: the collateralised debt obligations were considered to be too risky. They had the expertise to make that decision and they employed it, but they did not pass on the information. It is an unwritten scandal.
Before I conclude by outlining the Opposition's alternative vision and what an O'Farrell-Stoner government will do, my final point is about Standard and Poor's. Standard and Poor's reviewed the bill, and its concerns have been well encapsulated. It warned that the mini-budget might not be enough to lift the State from negative watch immediately, despite the Government having leeway to borrow more without risking its triple-A credit rating. It wrote, "We would want to see the government having the political willingness to execute what are seen to be unpopular positions". Standard and Poor's has checked the management of this State and said that it does not necessarily trust the Government to deliver.
Standard and Poor's has been watching the State for a considerable period and has been in dialogue with the Government for some time, but it is yet to reach a comfortable position. We are in a similar position: we share the ratings agency's concerns about the management of the State. As previously stated, the measures in the mini-budget do not do enough to stimulate the economy—in fact, they are doing the absolute opposite at exactly the wrong time. Standard and Poor's did not refer to funding, but I am sure that it will become an important issue. I implore Cabinet to consider that the Government's debt profile has been reduced by only a nominal amount. It is pretty much the same. Over the next few years the Government will want to borrow about $20 billion.
In that context, the Commonwealth Parliament is about to legislate a guarantee for basically every financial institution in the country. That means that financial institutions will rank ahead of State governments, or semi-governments. The financial institutions will then take liquidity out of the market and will significantly raise the cost of funds to this State. If I were sitting on the Government benches I would tell the Premier and the Treasurer that we need to start talking to the Commonwealth about the impact on State finances, because I think it will be significant. I think also that this is the real story. We could certainly reach the point where we cannot fund our debt profile because the financial institutions have taken the liquidity. Perhaps we should get a guarantee from the Commonwealth to bring us back into line with the financial institutions, which will give us some liquidity.
I turn now to the future—I will be brief because a number of Opposition members want to talk about the mini-budget. One of the biggest shortcomings in the mini-budget is that it puts bandaids on problems. It makes small cuts in various areas but it is piecemeal and it is mediocre. In a holistic sense, the mini-budget does not grab hold of the State's finances and take them in a certain direction. That is what an O'Farrell-Stoner government would do. The Opposition's "Planning for Prosperity" document contains four goals. Interestingly, the Treasurer suddenly produced four goals—notwithstanding that we had released our document 10 days earlier—three of which were fairly closely aligned to our goals. But that is another point, which I will not dwell on now. The important question is: Where do we want to go?
Unless the Government has a long-term strategic target it will not be in a position to attract investors to New South Wales. Those seeking employment or seeking to build on employment opportunities in this State will not get the signals they need. The Leader of the Opposition and the Leader of The Nationals have sent very clear signals with our four goals. The first is that it is about time New South Wales led Australia in sustainable economic growth. The two measures I have spoken about in that regard are gross State product and unemployment levels. For too long New South Wales has lagged behind on both those measures. Our goal is to drive those measures towards the average. We certainly should not be ashamed of that gaol; we should take pride in it. We recognise that this State's economic growth is important and strongly driven.
The Opposition does not accept that we have the highest or the second-highest unemployment rate in the country. The Opposition does not accept that we have the lowest rate of economic growth in Australia. In the last quarter New South Wales was the only State to record negative growth. We can pursue a range of policy directions. We want New South Wales to be Australia's twenty-first century State. In simple terms, that means it is not acceptable to sit back, look at our harbour and say, "Isn't it wonderful? Let every business come to us—but it's a shame that we don't have the geography that exists in areas with a commodities boom". Will we let that happen? No. We will start looking globally and head out into the world to find the industries, the developments and the opportunities, and bring them to New South Wales.
We must start that drive; it is not too hard. In China the emerging middle class will drive tourism. It will be unlike any opportunity this country has had before. The Japanese tourist influx was significant, but the Chinese influx will be even more so. But what are we doing to facilitate it? New South Wales has coal seam methane reserves that are potentially greater than those in Queensland. What are we doing to facilitate that industry? How are we helping with planning processes? How are we developing, proving up and delivering coal seam methane? And guess what? The industry creates jobs. It drives export markets and brings in royalties.
In the United States of America, Barack Obama spoke about five million green jobs. What green jobs are available to develop and foster in New South Wales? A Barry O'Farrell-Andrew Stoner government will facilitate those opportunities and will incentivise those industries to come to this State so that we will start to lead the country again. Another goal is to make New South Wales Australia's first place to do business. That is a pretty simple proposition, and a big commitment. We no longer want to lead the country in taxation levels; we will move towards the average. Some 75 per cent of all new jobs last year were created outside the boundaries of this State. That is unacceptable.
Mr Robert Coombs: There's a mining boom.
Mr MIKE BAIRD: We have had a mining boom, but that is not the sole reason. We cannot sit on our hands; we need to drive the mining boom. The Opposition has said that taxation levels for business will be reduced to the average, if not lower. Any business that is interested in coming to New South Wales should be aware that taxation rates will fall under an O'Farrell-Stoner government. We will also remove regulation—there will be an attack on regulation. Small businesses are suffering, day in and day out, but we will attack overregulation.
Our final goal is for regional New South Wales to be a place of opportunity. For too long there has been a divide. As the member for Swansea said, there has been a resources boom but the country has lower employment levels and lower incomes. It is time we closed the gap. We will incentivise businesses and government. We will look for opportunities to reinvigorate regional New South Wales and bring it back to the level it should be at. The final commitments, which are closely aligned to those of the Treasurer, are our fiscal commitments. I will speak to them in no particular order. The first is maintaining the triple-A credit rating. We have articulated that commitment, and reinforced the Government's position in that regard. Interestingly, the credit agencies have not reaffirmed it. We are committed to it. The Government did not do that in the mini-budget.
Mr Robert Coombs: They did it for 18 months.
Mr MIKE BAIRD: They did not reaffirm that commitment. In this current environment a triple-A credit rating is paramount. Any dilution of credit quality when there is a flight to quality has huge knock-on consequences and the State cannot afford it. The little asterisk that says this State is on credit watch is a concern for the people of New South Wales. We could pay for it both in terms of increased borrowing costs and in a loss of investors in this State. At this time and in this economic climate, the triple-A rating is imperative.
The second point in our fiscal commitments is to ensure expense growth must be less than or equal to revenue growth. We have just gone through those details and we do not need to harp about it. However, when the State is going backwards by $400 million or $500 million a year, the surplus today, if revenue and expenses were matched, would be $6 billion on an annual recurrent basis. It is a huge figure and it is the sort of opportunity cost we are seeing in this State because we have not been disciplined enough. The third point is to restore and enhance the level of front-line services. That is a commitment. Sydney Ferries, buses and transport in general are a good example. When you are driven by understanding what your customers want you start to see increased patronage. The same thing applies to the provision of State Government services. It is not about cutting here and there, it is about supporting the front-line workers. They have been ignored for too long. We are not even paying our front-line workers higher wages in line with the consumer price index. Their real wages are going backwards because of years of mismanagement by this Government.
The last point—I will finish on this and let my colleagues speak—is that we will ensure all Cabinet Ministers are accountable for fiscal direction and infrastructure delivery. This is such an important point. Every Minister who sits around the Cabinet table under an O'Farrell-Stoner government will be linked arm-in-arm with a commitment so that when a promise is made every person around the table will put themselves on the line and say, "Yes, it will be delivered." The public is completely cynical about announcements that are made and not delivered. What does that mean in detail? It means that Cabinet gets a monthly progress report on major infrastructures. You want to know early on if there are problems emerging. You want to know when you are constructing a tunnel if you have hit rock rather than sandstone. You want to know what that means, what the remediation is, what the costs are and what the implications are for the long-term nature of the project and whether it is going to be delayed. That was employed very successfully in Victoria and it is something that we are committed to 100 per cent.
It is beyond belief that when I asked the Minister for Energy in estimates about the $3.9 billion of hedging losses last year in generation assets—it is a good example of complete over-to-you finance; it has nothing to do with the approach of the current Ministers—the response was basically, "Don't ask me, that is a finance thing." That was the thrust of it. When asked specifically what was Cabinet's view of the $3.9 billion loss and what was said around the table, the answer was that nothing went around the table because it was not discussed. That was the response: $3.9 billion of hedging losses were not discussed at the Cabinet table. That would end under an O'Farrell-Stoner government. Every single Minister would be responsible for the fiscal commitment and direction and for infrastructure delivery. That is part of the vision for a fiscal framework that would take New South Wales from being the laughing stock of this country to the leading State.
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