Decay in a time of penury

The reason is that the “new public management” approach is based on woolly thinking, the primacy of the private sector and the power of self-interest. Organisations succeed through attention to shared goals and recruitment, training and development of staff as well as the practice of leadership, not forcing efficiencies through ongoing reduction of operational funding. Witness Southwest Airlines in the USA and schools in Finland.

While over the longer term, sustained imbalances in recurrent expenditure are clearly unsatisfactory, there surely can be no risk assumed for occasional deficits. Indeed they are appropriate occasionally to even out overall performance. After all, reacting suddenly to declines in the budget position leads to retrenchment of staff who take with them skills and corporate knowledge which have cost a great deal to acquire. It is likely that the reductions have already gone too far in some areas.

Infrastructure

As to capital expenditure the situation is more serious, but not as Mr Costa claimed. Australia nationally has a public debt at 15 per cent of GDP compared with more than 50 per cent for many western European countries. Were Australia to spend up to the same ratio on infrastructure development it could increase its borrowings by over $260 billion. (This is the same as a figure given some years ago by Canberra academic and commentator on leadership and economics Ian McAuley.)

The situation in the State is similar. Only in New South Wales, where investment has been poor for decades, it seems worse!

The failure in infrastructure provision is critical. Hospitals are a well known example. Transport is another. In city after city across the world, excluding much of the USA and Britain, modern and comfortable fast trains transport millions of people who are told in clearly intelligible announcements where they are going and even when they will get there. Timetables are near unnecessary because the frequency is about every 10 minutes. In Mexico City for example, the trains are fast, frequent and there is not a scrap of rubbish to be seen anywhere. In Denmark trains run to suburbs scores of kilometres away late into the night. In Rome small electric buses transverse the city.

But in the northern beaches of Sydney and many parts of the outlying west and south transport is infrequent and ceases by early evening. Train lines have been ripped up, big buses lumber through the narrow crowded streets and train stations at peak hour resemble New Orleans facing Hurricane Katrina.

The kinds of assertions made by Mr Costa, and accepted by journalists like Glenda Korporaal (“Hard work ahead for NSW Premier battling state debt”, The Australian September 10, 2008) who observed, "Former treasurer Michael Costa … revealed the true extent of the state's financial problems” are simply not universally accepted and haven’t been for many years.

It is significant and unfortunate that former Commonwealth Treasurer Peter Costello loudly proclaimed the evils of “excessive” borrowing by the States which would drive up interest rates by cramping the style of the private sector.

Former chairman of the Australian Competition and Consumer Commission Alan Fels, writing in The Age in July 2004, lamented the absence of significant new borrowing:

The principle that public infrastructure benefiting several generations is most fairly financed by government debt repaid by the taxes of several generations is simply no longer accepted by Treasury economists. Relative to the rest of the developed world, Australia's public sector carries barely any debt.

Fels noted:

By far the most dogged opponent of government debt is the rhetorical difficulty it presents for politicians. … [There is] now a concrete association in the public mind between a government that borrows and a teenager recklessly running up a credit card bill.