Why NSW is NOT state of the art!

Why NSW is NOT state of the art!

The economies of scale in NSW paint a precarious economic picture and with the global economic crisis the bank, otherwise known as the NSW government, is stone motherless broke. I wrote last week that our economy is in transition mode (moving from economic growth to economic consolidation) and should the NSW government decide to increase taxes in an attempt to correct this void then stage three being economic recession, is all but assured. Businesses in Australia are doing well – our governments are in economic “Struggle Street”.

Unfortunately the “grey matter” is simply not there and what our economy needs is people who previously ran and owned (successful) businesses instead of politicians who destroy businesses and economies. I and many others agree with Michael “Costya – plenty” that state governments should be abolished as they have proved that they are totally incompetent money managers. And now, the newly elected Premier believes that increasing NSW taxes is the answer.

With the NSW Labor Party it’s a case of here today – and (at $300,000 each time) by – elections coming to your electorate soon (that is less than 12 months since the last state election). Should Labor lose six seats they will then lose majority. Three months ago we were told that NSW boasted a $268 million budget surplus – now we are told the Fudge – it has a $1 billion hole.

No wonder NSW tax payers are up in arms! After seventeen (unprecedented) years of economic growth the NSW piggy bank is empty, well overdrawn and supposedly trading insolvent. In the business world you are incarcerated for this practice. In politics you get a pension funded by tax payers.

Julie Bishop the Deputy Opposition Leader (and apparently soon to be Opposition Treasurer) wrote in a blog this week exclusively for BusinessDay – “Rudd’s unhealthy state intervention”. “In recent years, the strong fiscal position of the Federal Government has made it an obvious “white night”.

But should the Federal Government step in when State Governments fail?

Combined with increasing revenues from stamp duties and other state taxes, State Governments received large windfall gains between 2000 and 2007.

A review by respected economist Henry Ergas in November 2007, titled State Performance and the Future of Commonwealth – State Relations, found the States received almost $50 billion more revenue in 2005 – 06 than they received in 1999 – 2000.

Despite this strong growth in revenue, the fiscal position of State Governments has deteriorated.

Ergas found that when State Trading enterprises are included, State Government debt is forecast to rise from less than $11 billion in 2005 – 06 to more than $80 billion by 2010 – 11.

He raises two serious concerns about State Government performance in recent years – a large increase in administration costs due to rapid growth in public sector wages, but without corresponding productivity gains. For example, public sector wages in NSW grew 13% more than comparable private sector wages between 2000 and 2007. The second concern is that States invested only $2 billion of the $50 billion increased revenue on infrastructure.

So that explains why every department in NSW State Government is broken and we must not forget that the Unions are strangling NSW too. The problem that Nathan Rees faces today, is that if he increases taxes this will damage business activity. If he cuts public spending, the unions who manoeuvred him to the position of Premier will crucify him as they did with Morris “Dilemma”. Remember that prior to the last State election Peter Debnam promised to cut approximately 20,000 non front line public servants from the State payroll.

This then resonates through Federal Labor – which is fast becoming a not so happy union. Messrs. Rudd and Swan are finding that this problem was not inherited by the previous Howard Government.

Our central bank was busy this week filling out withdrawal forms when they injected $11.2 billion in cash into our financial markets. Now before people start jumping to conclusions and that recession word, a reminder that in our last recession (who could forget it) the cash rate in 1990 was 17.50 per cent where today it is 7.00 per cent and falling. Unemployment reached 11 per cent where today it is 4.2 – 4.4 per cent.

NSW needs to get its own backyard in order as currently it is rotten to the core.

The property market has been ‘housing around’ this week with a new Australian record – a Vaucluse beachfront home that sold for $47 million – plus. This month there have been four recorded sales in excess of $20 million and a Northbridge waterfront sold this week for $9.500 million.

Have a look at our House of the Week – an iconic Mosman home. Cheers ^__^

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