There has been intense media speculation on the fate of New South Wales infrastructure plans following the "discovery" of a supposed $20 billion dollar "black hole" in the NSW budget, announced by departing treasurer Michael Costa on September 5.
The failure of ex-premier Morris Iemma's government to force its complete electricity privatisation agenda through parliament, it is claimed, has left the state desperately short of funding options for Sydney's woefully inadequate public transport system.
On October 2, the Sydney Morning Herald sensationalised the issue, with its headline screaming, "We can't afford to keep Sydney running: Rees". The SMH blamed Sydney's "population explosion" for the increased infrastructure needed to provide adequate public transport for the growing city.
In a September 25 article, the SMH cynically attributed the growth to Australia's "biggest migration boom" — which it claimed was also "exacerbating the rental crisis" — in a move to focus anger on migrants rather than the failure of neoliberal governments to direct sufficient investment to desperately needed infrastructure.
The scale of the need for increased public transport development is abundantly clear. Jago Dodson and Neil Sipe, in their study Unsettling Suburbia: The New Landscape of Oil and Mortgage Vulnerability in Australian Cities, released through Griffith University in August, found that oil and mortgage vulnerability had increased by 41% in Sydney between 2001 and 2005.
The apparent crisis afflicting Sydney does, however, have a simple solution. Government investment in well-planned infrastructure that remains in public hands is well overdue and will provide the services that the working people of Sydney need.
Build railways
In November 2000, the NSW government (then headed by Bob Carr), commissioned Ron Christie to develop a long-term plan for rail infrastructure in Sydney and its surrounds. In June 2001 the Long-Term Strategic Plan for Rail (the "Christie Report") was released, recommending significant upgrades, improvements and extensions to the Sydney rail network.
The Christie Report advised the extension of the southern rail line to growth areas west of Glenfield, to construct a heavy-rail line linking Chatswood with Parramatta in the one direction and the Hills district linking to Richmond in the other. It also advocated the building of integrated "metro" services linking the CBD with Parramatta, with two further metro lines linking Castle Hill in the north-west with Hoxton Park in the south-west, and Cronulla in the south with Dee Why and the northern beaches.
The report offered a comprehensive solution to Sydney's rail transport needs. Successive neoliberal Labor governments, focused on reducing public spending, have baulked at the plan in its entirety, instead attempting to take sections of it piecemeal.
The Carr government, for instance, went ahead with the Epping to Chatswood rail link, but failed to extend the line to Parramatta. The Iemma government abandoned plans to build a heavy-rail line through the north-west and substituted the plan with the idea of the "North West Metro" to run from the CBD, via Victoria Road to the Hills district.
The failure of the Iemma government's planned privatisation of electricity generators has left the new Labor premier, Nathan Rees, crying poor. As a result of the apparent budget "black hole", both the (largely inadequate) North West Metro and the South West rail link to Leppington now appear under threat and may be sacrificed in the upcoming November 11 mini-budget, in order to maintain NSW's AAA credit rating.
Credit ratings fears
In a briefing paper released on September 20, Bob Walker, professor of accounting at the University of Sydney, and Betty Con Walker, former Treasury official, argue that NSW Treasury is radically exaggerating the threat to the state's AAA credit rating posed by the failure of the government to sell electricity generators.
The Walkers argue that the threat posed by ratings agency Standard and Poor's to downgrade NSW's credit rating to AA+, and so increase the cost of interest on state borrowings, is largely politically motivated. They argue that state government finances would be better served by keeping electricity in public hands.
Privatisation "would actually increase the state's risk profile", the Walkers argue. "That is because it would involve the loss of a stable income stream (currently earning around 24% per annum on government equity). That would make the State's finances more reliant upon relatively volatile stamp duty and other revenues."
Should NSW's credit rating be downgraded, however, the costs to the NSW budget would be in the order of $7-$14 million per year — not the $500 million touted by Costa and subsequently by Rees. "In the context of a State budget of around $48 billion, that would only increase expenditure by around 0.014% to 0.029% per annum — a relatively trivial amount", the Walkers argue.
Based on the Walkers' analysis, the state government's claims that it can no longer afford to pay for much needed infrastructure is simply nonsense.
Federal funding
In response to the global financial crisis, PM Kevin Rudd announced on October 2 that the federal government would fast-track the implementation of its $20 billion Building Australia Fund (BAF). The states have been asked to submit lists of proposals to an "independent" body, Infrastructure Australia (IA), which will recommend which projects should be subsidised with federal funds.
The aim of the BAF is not primarily to guarantee the building of the most needed infrastructure. If it were, there can be little doubt that publicly-owned heavy rail would top the list. The federal funds are intended to "prime" the economy, according to the October 3 Australian.
The purpose of the funding is not to provide sufficient public funds to build infrastructure, merely enough to guarantee private investment in public-private partnerships (PPPs).
On October 6, Rees announced the nine biggest priority projects that the state will submit to IA for funding consideration. Of the nine, seven are road projects and all are conceived as PPPs. Of the desperately needed extensions to passenger rail transport in NSW, only the West Metro made the list.
Rees has consistently refused to guarantee the future of the North West Metro or the South West rail link since becoming premier on September 5.
The Walkers' analysis shows that there is no financial impediment to NSW borrowing to fund its future infrastructure needs. The only barrier is political.
Rather than seeking to build more road extensions, with profits accruing to the private sector and which — by attracting more cars onto the road — are self-defeating, the NSW government must invest in public transport.
The blueprint advanced in the Christie Report sets a useful framework. An integrated, heavy-rail network extending to all parts of Sydney is the only sustainable long-term way of equitably servicing Sydney's growing population. Anything less is simply window dressing.