Yesterday the 2008/9 state budget was presented in parliament. It is a huge change of direction from the Bob Carr/Michael Egan years when the impetus was on reducing debt and making this state debt free.
The Iemma government has no other option than return to borrowing - with $ 20.9 billion earmarked for transport, education and health. This borrowed money will prop up a health system that is actually killing patients, start to fix crumbling schools and provide more Outer Suburban Rail Carriages ( OSCARS ) to replace what commuters refer to as " cattle cars ". It seems that long suffering commuters from the north coast, Illawarra and the Blue Mountains may finally get trains that have toilets !
Business will be surprised to see a small change in payroll tax - from 6% to 5.5% - which will be implemented over four years. Again the Iemma government had no option. Payroll tax is so out of kilter with the other states that many companies were considering migration to a less predatory regime.
As usual, the Illawarra not only missed out but from this budget will get $ 32 million less than last year's $ 455 million. The government re-announced existing projects such as the Northern Distributor extension - which is half built - but will again rely on Labor voting Wollongong to toe the party line without reward.
Many think the Iemma government has abandoned traditional Labor principles and this seems evident from the present policy of restricting pay rises for nurses, teachers and police to 2.5% - despite inflation at over 4%. In effect, the government is demanding that union people take a pay cut in real terms, setting the scene for a major confrontation between unions and the government.
By and large this is probably a reasonable budget. More money will be spent on health, education and transport which are in bad shape - but the question remaining is whether this government has the skill to achieve the promised achievements - or if we will see a repeat of the debacles that have plagued these three services in past years.
The " elephant in the corner " is the unresolved conflict of power generation. This could easily degenerate into open warfare between the unions and ALP branches - and the government. If that happens - all bets are off.
The fate of this state government depends on two things - resolving the power crisis - and managing a credible restoration of public facilities !
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