Same cracks, just a new coat of paint

For a start, NSW's net debt is extremely low, less than 3% of the Gross State Product of NSW. Compare that with about 7% at the Commonwealth level.

Why should the arbitrary ratios of discredited rating organisations like S&P and Moody's retard NSW's development? Debt is entirely appropriate for large-scale public works using proven technologies. NSW, with a growing economy and population, should willingly go into significant debt.

In any case, were NSW's credit rating to fall a notch, the extra cost of additional debt would likely be only a few extra basis points, a very small cost to bear.

Infrastructure spending is crimped at the local level too; the Minister for Local Government, alone among Australian states, imposes caps on rate increases by local councils.

The government's mooted Waratah bonds, if successfully offered to retail investors, might remind voters that debt can be beneficial if the proceeds are spent wisely.

Nor did the NSW budget make any attempt to reform the state's moribund taxes. States taxes are overwhelmingly the most damaging. The Henry review showed last year that stamp duties on insurance policies inflict an economic loss on society about three times that of income tax. Stamp duties on property are four times at damaging as land taxes.

If the NSW government cared about long-run economic welfare, it would abolish these taxes, and broaden the base and lower the rates of land and payroll tax to make up for it – short-term pain for very significant long-term gain.

The Henry review considered at length the benefits of swapping motor vehicle registration for an intelligent congestion tax. Indeed, the Liberal party's pre-election manifesto claimed "urban congestion costs NSW more than $4 billion in lost productivity each year", yet the budget proposes to do little about it.

If the NSW budget is pusillanimous the Commonwealth must wear some of the blame, notwithstanding the government's less favourable numbers in the upper house. Decades of meddling with states' policies and undermining their financial independence have taken their toll.