By Denis Bright
After more than a decade in Opposition, NSW Labor is striving to deliver an inspirational Budget for the Many.
Treasurer Daniel Mookhey’s budget presentation has been well received by ABC News coverage (19 September 2023) for its cautious and responsible priorities. In the absence of recent state polling data in NSW, Labor should be satisfied with its Federal Newspoll results in NSW with a 56-44 divide in that state. This might assist in marginal state seats like East Hills, Upper Hunter and Penrith which are all held by the LNP by less than a one per cent margin after preferences. Labor needs to win these seats in the future to achieve majority government after a decisive 6.3 per cent swing to Labor after preferences on 25 March 2023 which gave Chris Minns the Premier’s job.
The NSW state budget is projected to be in surplus 2023-24 if the growth in the revenue base continues from land taxes, payroll taxes, property transfers and coal royalties. The stars have aligned well for the change agenda in NSW before the economy slows in the mid-2020s across Australia.
The short-term revenue windfall extends beyond debt reduction. There are popular initiatives in affordable housing, alternative energy projects, rental assistance and support for Western Syndey.
Unfortunately, higher coal royalties of $2.7 billion will not commence until 1 July 2024. Royalties have not been increased since 2009.
The budget brought a spending cut of $188 million in NSW film and television productions. This was a token saving in a total budget with a projected outlay of $120.23 billion for 2023-24. This token saving helped to achieve a slight reduction of $101 million in accumulated debt of $26.28 billion inherited largely from the LNP years.
The address in reply (21 September 2023) from Opposition Leader Mark Speakman SC MP (Cronulla) can also be perused by readers.
The state LNP’s concerns about Union Mates of State Labor, is not backed up by a healthy state of trade union membership or impending militancy in the workforce which can expect a significant rise in unemployment during the first term of the Minns Government.
Mark Speakman criticized pending wage agreements in his address in reply speech by insisting that pay increases should be moderated by productivity criteria over cost-of-living adjustments. This would not be a popular initiative by voters who are paying higher rents and mortgages.
A commitment to bipartisanship in handling burgeoning debt problems in NSW and a positive feature of Mark Speakman’s address-in-reply.
Both sides of NSW politics should be addressing the consequences of a slowing economy and its future impact on capital works programmes after the euphoria from the current short-term revenue windfalls tapers off during the mid-2020s. Projected capital expenditure of $19.92 billion in 2026-27 compares with current record levels of $22.23 billion in 2023-24 as summarized in the budget papers.
The new government will temporarily terminate revenue transfers to support the NSW Generations Fund. It will review options for the other key NSW investment funds.
The Media office at NSW Treasury Corporation (TCorp) did not want to speculate about alternatives to the decline in capital works spending in the forward estimates. As an executive arm of government, this response is quite appropriate. Perhaps senior officers at TCorp are appropriately working on these problems behind the scenes.
The current budget papers estimate that funds under management from TCorp amounted to $106 billion on 30 June 2023, including $2 billion in sustainability bonds.
T Corp has a list of its extensive bond offerings which have been updated to 30 September 2023. These bonds are available to institutional investors both within Australia and overseas.
Financial commentators as well should indeed be thinking ahead of the showdown in capital works expenditure in the forward estimates.
With Labor now in control of the national government and all mainland states and territories, it is time for inspirational commitment to the policy essentials in housing, infrastructure and community development.
Capital investment flows cleared on security grounds by appropriate national authority like Treasury or the Reserve Bank might be possible might be a source of new capital equity. This is a good opportunity for Premier Minns and Treasurer Daniel Mookhey to inspire the nation in the traditions of Premier Sir William McKell and other great Labor luminaries in NSW politics.
Infrastructure and Community Development strategies need to be steered away from the pork-barrelling strategies of the recently defeated LNP Governments in NSW.
Successful and ethical methods of new investment are a feature of many of our best Australian corporations. Perusal of the latest annual report from the Woolworth’s Group for 2023 offers investors access annual revenue base that is half the value of expenditure by the government of NSW.
Just 92 shareholders in the Woolworth’s Group control 62.93 per cent of all issued capital and dwarf the humble shareholdings of almost 250,000 shareholders who own 6.75 per cent of issued capital.
The Woolworth’s Annual Report is quite open about its major shareholders. (There is also a category for Substantial shareholders in the 2023 Annual Report.)
Some investors from the Top of Town might also be attracted to well credentialled public sector investment and sovereign wealth funds. There could be good returns for investors in delivering better port facilities, transport-oriented development centres of housing, shops and offices, refilling stations for electric vehicles and alternative energy programmes to name a few revenue earning prospects.
Currently, Australian public sector funds reply on bond offerings, investment from internal government reserves and state managed superannuation funds through co-investment processes.
Some exemplars include Temasek Holdings and GIC in Singapore, the Canadian Pension Fund, the Canadian Infrastructure Bank and in Australia the Clean Energy Finance Corporation (CEFC) and Biomedical Translation Fund (BTF).
The previous NSW LNP was so desperate for investment that it dipped into government coffers for new investment in the NSW Generations Fund. These irregularities have been temporarily terminated by the Minns Government but may have to return in the mid-2020s when capital works spending slows unless alternative sources of investment are considered.
Peter Hannam of The Guardian (21 October 2021) gave a critical take on public sector investment in the NSW Generations Fund using taxation revenue. At that time, NSW’s ballooning debt is on track to reach $171 billion by 2025.
With better safeguards in place, Labor governments at state and federal levels, should be able to do much better.
The Queensland Investment Fund (QIC) has profitable outcomes from the investment of government and state superannuation reserves. It is not geared up to accept capital equity from the private sector like most public sector investment funds across Australia.
Despite these limitations, QIC acquired Castle Towers in Sydney in 1998. It has invested $1 billion in the project and just lodged a development application for a $560 million precinct known as The Village with three levels of retail, a 200-room hotel and a 12-storey office tower. As an investment fund QIC focuses primarily on investment returns for the Queensland government. Social and environmental criteria are an optional extra but usually receive careful consideration.
In the far-off USA, QIC has fifty-year leases over the management of university car parking facilities at Northeastern University in Boston and Ohio State University in Colombus. The combined investment at these two sites approaches $1.5 billion and involves competition with top of the town firms like BlackRock and Morgan Stanley who are both key investors in the Woolworth’s Group closer to home.
Serving the needs of university students in the USA provides an indicator of just what can be achieved for the benefit of residents on the home front back in Australia as dividends accrue. Too much freedom to overseas corporate investors in Australia can produce negative outcomes as profits drift back to overseas headquarters or exotic tax havens.
Under the free trade and investment arrangements between Australia and the USA which were negotiated by the Howard Government twenty years ago, there seem to be embedded opportunities for tax avoidance which contributes to the public debt problems faced by Australian governments. Hopefully, ABC News will assist readers by sharing the no taxation payment list of these corporate giants later this year when taxation returns are available for 2022-23 in the first full year of the Albanese Government.
Although sections of the mainstream press generally applaud the economic management skills of LNP governments and neoliberal governments at all three levels, the real evidence of this expertise is difficult to find in NSW Government investment priorities during the LNP years or with federal LNP government projects like the Inland Railway.
The federal LNP’s Inland Railway still lacks a starting point and terminus although construction has been underway since 2018. Its estimated cost has doubled to $31.4 billion.
Labor needs to take initiative to reclaim its heartland base in outer metro and regional areas. Revitalizing infrastructure is a real opportunity for voters in NSW and Beyond.
Voters will warm to the policies of dedicated governments that are delivering for them by welcoming the resources from the bid end of town in hedge-fund commitments to public sector investment and sovereign wealth funds.
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Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.
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Takes a Queenslander to offer a take on the NSW Budget. Which side are you on Denis in the State of Origin Stakes when you live north of the Tweed? Did you get a security clearance to write about NSW Finances?
Let’s return to some needs based policies and more voters might re-engage with formal politics.
A well researched article, Denis. The spirit of Sir William McKell still lives on in your investigative work for readers.
A lot of small business people face problems getting government contracts as governments seem to prefer offering contracts to big corporations. This is surprising as many of these corporations demand tax offsets to avoid paying taxes.
Are the lobbyists for the big corporations checked out by ICAAC in NSW?
Now the Opal Card for transport in Sydney sounds very authentic. I check out Pearl Consortium which has the contract for the Opal Card until September 2024. Its members are the Commonwealth Bank, Cubic of San Diego and Downer EDI.
Co-investment strategies could and should avoid such corporate connections and bring the ticketing systems back into government hands.
It is a pity that the Australian government is to invest $5 billion to control spyware on strategic grounds. There are more obvious security problems inherent in tax avoidance and lobbying payments..
Are Australian taxpayers being taken for a ride?
Volunteers are working to restore part of the train service near Byron Bay. This is a lovely heritage effort but does not solve our local traffic problems or excuse the NSW Government from its decision to close the railway to the North Coast from Casino.
Sustainable planning needs resources for the governments struggling at all levels to deliver for the people.
Australia needs an anti corruption agency in every state and at a national level. Too much influence is slipping out of Australian hands. Australians should be in revolt against saturation advertising by multinational companies for greasy junk food which are causing so much diabetes and heart disease.
Laura,
a comprehensive ban on gambling ads probably wouldn’t hurt society too much either.
Without the ABC there would be little coverage of tax avoidance .
Support for Chris Minns and his talented team crosses the political divide. The leaders of NSW largely represent working class electorates. Education minister Prue Car was indeed born in Western Sydney and serves as Deputy Premier.
Building up the Generations Fund as a sovereign wealth fund should be assessed beyond NSW at a national level through the Future Fund.
If firms like Woolworths can take capital investment from far and wide overseas, our investment and sovereign wealth funds could move in a similar direction.
Let’s open up capitalism by legislative means to serve the needs of working people in the transition towards a better social democracy. This was the dream of earlier generations of Labor supporters across NSW. It was lost by some of our leaders in the neoliberal era and must be rediscovered.
There is little in common between the needs of people in the Londonderry electorate of Prue Car and the corporate fantasies of insiders in JP Morgan Chase based in Delaware, Black Rock in New York and State Street based in Boston that collectively own one third of the shares in the Woolworth’s Group. Those minds have little to do with St. Mary’s or Mount Druitt.
Just find me somewhere affordable to rent FFS!
Business studies offer new opportunities for alternatives to current neoliberal policies which are still attractive to some older insiders on both sides of politics. NSW has a chance to made new ground in the private sector’s funding of investment funds with links to TCorp in Syndey.
Here are some theoretical supports for these measures:
Several of the Keynesian economists favour a greater use of public sector investment funds and sovereign wealth funds in fairly stagnant economies.
• Gaël Giraud has argued that public sector investment funds can be used to “crowd in” private investment and boost economic growth. He has also argued that sovereign wealth funds can be used to finance strategic investments in areas such as infrastructure and renewable energy.
• Thomas Palley has proposed the creation of a “national investment bank” that would be funded by the government and would provide loans to businesses in high-growth sectors. He has argued that this would be a more effective way to promote economic growth than tax cuts or other traditional fiscal policies.
• Stephanie Kelton has argued that the government should use its sovereign wealth funds to invest in infrastructure and other public goods. She has argued that this would create jobs, boost economic growth, and reduce inequality.
Best wishes to Daniel Mookhey and his team of Treasury Office advisers in coping with the investment blues in Outer Metro and Regional NSW with policies that are also endorsed by Jim Chalmers to revitalise Labor’s take on the wealth divide in Aussie society.
Denis, thanks for a well-researched article on the NSW state budget.