NSW: The soap opera is not over

Less than a week after declaring that "the soap opera is over" in New South Wales politics, new Premier Nathan Rees had to sack his police minister of three days, Matt Brown, for allegedly drunkenly "mounting the chest" of Wollongong MP Noreen Hay in a "dirty dancing" party in Parliament House during the June budget session of parliament.

The soap opera is not over.

However, the first real test of the Rees government's ability to break from the worst traditions of ex-premier Morris Iemma and ex-treasurer Michael Costa was whether it would accept the argument that everything must be done to protect the state's AAA credit rating, by acting to fill a gaping "budget black hole" of $1 billion maliciously revealed by Costa in a his last press conference as treasurer.

This is mainly due, according to the treasury department and Costa, to a monthly $90 million shortfall in stamp duty revenue arising from the property market slump and a health budget that has blown out by $300 million.

But Rees failed that test on his first day in office. Instead of explaining to the people of NSW that there are economic goals that are equally if not more important than maintaining a AAA credit rating the new premier caved in to corporate and Treasury blackmail: the economic policy of his administration would do everything, like Iemma and Costa's, to keep the budget in balance.

What else could Rees have done? Firstly, he could have explained that the main reason there is an infrastructure crisis in NSW (and Australia) is because throughout the 1990s and 2000s governments, both state and federal, Labor and Liberal, made reducing government debt and running budget surpluses into a holy mantle. The cost of this fetish was a sharp reduction in public expenditure on the items that could be most readily cut, namely longer-term infrastructure spending. This fetish became so set in Labor treasurers that even sections of the business elite (such as the Australian Industry Group) complained that the states were insufficiently indebted!

Rees could have quoted former federal treasury economist Nicholas Gruen, who wrote in the September 9 Australian Financial Review (AFR), "If the benefits of increased investment outweigh the modest costs of slipping to AA, NSW should do it, as most companies do".

Secondly, Rees could have asked the question "Who rates the ratings agencies?" Instead of cowering before the Standard and Poor's "judgment" that NSW state debt has a one-third chance of being downgraded to AA, he could have questioned the credentials of an outfit that was telling its clients that certain financial instruments which bundled US sub-prime mortgages with other forms of debt were AAA … a short time before they were revealed to be worthless.

Thirdly, he could have told the truth about the real degree of NSW indebtedness, comparing NSW projected net debt for 2012 (7.4% of gross state product) to the OECD average (47%).

Having done none of this, Rees must decide how he and his new treasurer, Eric Roozendaal, will fill the "budget black hole". It could be easily covered by postponing the $1.9 billion in payroll tax cuts that Costa handed business in his June budget, or by increasing coal royalties, as Anna Bligh's Labor government has done in Queensland.

Of course, such moves have already been described by NSW Business Chamber chief Kevin MacDonald as "a kick in the guts" for business confidence.

The likely direction of the Rees administration was given by Roozendaal in an interview with the September 9 AFR: "The responsibility I have is to sort out the state's finances and protect our AAA rating. If that means we have to shake the public service tree, then it'll be shaken."

What does this all mean for the campaign to prevent the sell-off of NSW electricity retailers (and other public assets like Sydney Ferries)? The answer is that it would be totally naive to expect anything different from the Rees government than from its predecessor. Indeed, the Rees government could be tempted to use its "fresh faces" approach to press harder with public sector cutbacks than the hated and compromised Costa could risk.

As Green Left Weekly goes to press Unions NSW is seeking an urgent meeting with Rees regarding the retail sell-off plan and to discuss alternative proposals. While it is right for the union movement to probe for any change of line from Iemma-Costa, all the signs are telling us that only by intensifying the campaign that ended the privatisation of the electricity generators will we also be able to save the retailers and block future privatisation plans of other public services.

The movement against privatisation should base itself on the September 5 rejection of retail electricity privatisation by a Sydney mass meeting of energy union delegates. We must build all the coming events of Sydney Power to the People, as well as distributing its new model motion against the sell-off (see page 4).

Most of all it means planning now for a mass protest outside parliament house the day that treasurer Roozendaal brings down the mini-budget that Costa announced before his political legs were cut from under him.

[Dick Nichols is the national coordinator of the Socialist Alliance.]