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State of decay

December 12th, 2007

In response to my observation that “… the Labor government in NSW is cementing its reputation as the country’s worst fiscal manager.�

Ken Lovell ups the ante, pointing out

I don’t think you need be so narrow in your description of its incompetence. ‘Country’s worst government’ is fine.

Let me see him and raise him. It seems to me that, looking back as far as I can remember (to the late 60s), NSW has had consistently worse political leadership than any other state.

On the Liberal side, Askin was an old-style crook while Greiner pioneered the new style of doing cosy deals with big business and cashing in with highly paid sinecures after retirement. I almost forgot John Fahey, which is about all I need to say. Then there were a dozen or so unsuccessful opposition leaders, quite a few of whom managed to lose their own seats one way or another.

Labor produced one decent leader, Neville Wran, who succeeded the failed hack Pat Hills. Apart from that there was Barry Unsworth, another failed and forgettable hack, Bob Carr who followed in Greiner’s footsteps and now Iemma, who seems set to combine the worst of Unsworth and Carr, except that the Liberals are now so dire that they couldn’t lay a glove on this easy target.

Disasters like this don’t happen by accident, and it’s no accident that this crew has been put forward by the two most power-crazed and least policy-competent party machines in the country, both of which can be called the “NSW Right” (not that their permanently downtrodden factional oppositions have done much better).

The looming electricity fiasco is just the latest in a string of similar boondoggles of which the Cross-City Tunnel, Port Macquarie hospital, and Sydney Harbour Tunnel are emblematic examples. The successive governments of both parties have been lousy at running public services and even worse at privatising them. I’m no fan of Jeff Kennett but at least when he privatised something he did it properly – a trade sale to maximise the price, and little or nothing in the way of silly offsets and cosmetics. And while running public services is a difficult job, Labor has generally tried – I don’t see much evidence of this in NSW.

Perhaps karma is at work here. With the rise of global cities, of which Sydney would have to be among the top ten, a competently run NSW would have left the rest of the country in the dust. As it is, things are a bit more equitable.

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  1. swio
    December 12th, 2007 at 07:07 | #1

    One of the reasons myself and my family are considering moving out of Sydney (apart from property prices) is that the infrastructure is hopeless with little sign of getting better. Railway lines that have been desperately needed for a decade already are not scheduled for completion until 2018 with construction still and perhaps never to be started. I am always a bit envious of Brisbane and Melbourne with their freeways that take people from the outskirts right into the heart of the city. In Sydney we have to put up with tolls on motorways which only take you half way.

  2. observa
    December 12th, 2007 at 07:46 | #2

    Looking at the bigger picture, wall to wall Labor govts should now ring alarm bells for our democracy and the overall calibre of administration. We are just not going to get competent administrators into our parliaments, whilst they have to run the gauntlet of local preselection, kissing babies and cutting ribbons and the like. We need to reverse the order of electing our houses of parliament, so that the parties can select their best talent and place them at the top of their tickets. As well this allows all views to be represented (on the last national poll the Greens would have earned 11.4 seats with 7.6% of the national vote), does away with marginal seat pork barrelling and branch stacking and encourages concentration on macro issues. As well we should pay the pollies top dollar with standard 9% super and no long tailed handshakes whatsoever. Let the upper houses be a seat based, ‘keep the bastards honest’ house with rigorous review powers and these members are given appropriate office staff to handle the local gripes and feedback. Without this change, all we are going to get is professional students and union hacks, running the place in the long term, whilst real talent concentrates on making money, or resides in safe academia. It’s largely come to that now. As you say in NSW- Where’s the credible Opposition? Doing what Peter Costello or Ross Garnaut are doing.

  3. observa
    December 12th, 2007 at 08:08 | #3

    And what’s more if you ever want to get a Republic and get around the thorny problem of electing a PM and a President, the punters might compromise with letting their local member based upper houses select the Governors and GG on their behalf. At present there’s a Mexican standoff preventing the desired move to a republic.

  4. derrida derider
    December 12th, 2007 at 08:31 | #4

    Oh come on, John – you wouldn’t say the Wran, Fahey and Carr governments were worse than the Bjelke-Petersen one would you? Not that I’m an admirer of any of them, but there are certainly degrees of badness.

  5. 2 tanners
    December 12th, 2007 at 08:54 | #5

    Observa,

    As a South Australian, you are subject to probably the single worst bureaucracy in the country. Others are shambolic, true, but yours is ossified. Its practices are out of the 70′s or earlier, including restrictive hiring, zero performance management and few incentives to do better.

    Most of the eventually effective reforms of public servies that I have seen have started with bloodbaths (mostly of the innocent), caused massive disturbance and uprooting, damaged the effectiveness of administration for years and so on. There has to be a better way, but I haven’t seen it in action yet.

    But my real point is, it has nothing to do with the ALP. It is much more about an organisation which protects itself first and in which process has become far more important than policy or results.

  6. observa
    December 12th, 2007 at 09:19 | #6

    2 tanners,
    We have exactly the same problems as most of the States. An incumbent administration well versed in the art of spin and an ineffectual Opposition, devoid of even that dubious talent. We can’t even maintain our diesel train fleet properly, let alone dream of electric ones. Our transport minister is a bumptious union hack of course
    http://www.news.com.au/adelaidenow/story/0,22606,22906329-2682,00.html?from=public_rss

  7. December 12th, 2007 at 10:51 | #7

    Derrida Derida, the Bjekle-Petersen govt may have had some shortcomings, but lack of infrastructure planning/construction certainly was NOT one of them.

    Which I think is more or less sort of de facto the main point of this thread in a roundabout ambiguous way.

  8. jquiggin
    December 12th, 2007 at 11:39 | #8

    Taking the rare opportunity to agree with SATP, the Bjelke-Petersen government did a reasonably good job of doing what it set out to do in terms of providing infrastructure for the mining industry and a low-tax environment for things like tourism. It was the wrong strategy in important respects (most obviously in low provision of education, which has necessitated the protest-too-much Smart State) but it was done competently. The last days of the Nationals around 1990 were pretty shambolic, but all the subsequent governments (Goss, Borbidge, Beatty, Bligh) stand up pretty well to comparison with NSW.

  9. Mr Denmore
    December 12th, 2007 at 11:40 | #9

    My feeling is that Sydney has perenially incompetent state government and bureaucracy BECAUSE, not despite, its standing as a global city. Sydney’s natural attractions are such that its politicians and civil servants feel they don’t have to try very hard.

    That the mediocrities in the Iemma government were re-elected speaks volumes for the incompetence of the Liberal Party in NSW.

  10. melanie
    December 12th, 2007 at 11:53 | #10

    Does hubris come in anywhere here? I always felt something was wrong when somebody put Premier State on the numberplates.

  11. December 12th, 2007 at 14:37 | #11

    so you keep voting for politicians, and are amazed when you are ruled by politicians. ‘amazed’ that is, that they can’t do anything competently, except get elected. don’t you get it, if they were competent at running large public enterprises, they’d be ceo of bhp billiton, not premier of nsw.

    talk about slow learners….

    more seriously, don’t you suspect that the selection process of political parties has no means of testing management skills?

  12. Stephen L
    December 12th, 2007 at 14:55 | #12

    Aren’t you forgetting Tasmania (I know everyone does). Other than the two periods of minority government it looks to me like one disaster after another, with vast amounts thrown away on various useless schemes, now sinking into straight-forward corruption.

    Fortunately for them they were saved from spending mega-bucks on the Gordon below Franklin dam, which besides the environmental damage would have been the mother of all white elephants, given that the demand for power never reached the point that it was actually needed.

  13. melanie
    December 12th, 2007 at 15:14 | #13

    al @11, we’ve all just been waiting (with admittedly unbated breath) for you to make your obvious comment on this one!

  14. rog
    December 12th, 2007 at 16:02 | #14

    Denmore raises a point that is reflected in the tourist industry; Sydneys natural attractions allow facilities to coast along whilst other cities, like Melbourne, have to work harder to give a better quality of service. Melbournites might disagree, of course

  15. David
    December 12th, 2007 at 16:23 | #15

    Your main problem in NSW is that you’re still run by the Rum Corps (or modern equivalent).

  16. Joe
    December 12th, 2007 at 17:06 | #16

    On my reckoning, Sydney doesn’t make it as a global city on the Wikipedia criteria .I would tick numbers 1,3,6,7,8,12 only. But then I live here.

  17. rog
    December 12th, 2007 at 17:22 | #17

    A few years ago I brought a boat from Port Lincoln SA to NSW. Most of the way was uneventful, apart from the oil wells in Bass Strt and Wilsons Prom. Entering Port Jackson was exciting – Port Phillip Bay, Moreton Bay, Adelaide are poor cousins by comparison. Those on board not from NSW were gobsmacked.

    Sydney is the blonde that gets all the stares.

  18. Spiros
    December 12th, 2007 at 17:50 | #18

    What is so terrible about the cross city tunnel?

    The government got paid 100 million dollars, the tunnel got built, and a bunch of private investors lost their shirts because they over estimated the number of cars that would use it.

    This was obviously bad for them, but so what? The people of NSW have their tunnel and the government has the money.

  19. jack Strocchi
    December 12th, 2007 at 21:28 | #19

    Sydney was a den of iniquity when it was founded. It went through a decent period from WW1 through to the Vietnam War, which featured its great age of building (Bridge, Opera House, free Freeways). Since then it has lapsed back into its criminal type.

  20. John Bignucolo
    December 12th, 2007 at 21:57 | #20

    What is so terrible about the cross city tunnel?

    The Cross City Tunnel wikipedia entry is a good place to start.

    What the CCT encapsulated was the way in which business is done in NSW. Not by long term, evidence-based policy analysis, but by backroom deals. It wasn’t a well thought out solution to a pressing problem. On the contrary it was ad-hoc’ery of the worst kind. A group of PPP proponents (in this case led by Deutsche Bank) pitched the project directly to the offices of the Premier, Bob Carr, and the Minister for Roads, Carl Scully. They in turn directed the RTA to build it.

    It demonstrated the extent to which a set of intersecting interests – political (the ALP), financial (Deutsche Bank in this case), and construction (Balderstone Hornibrook in this case)
    in NSW are able to control government process to benefits their interests to the exclusion of the public interest and sound public policy.

    In the NSW system, the ALP provides the links between the groups, with former ALP staffers and parliamentarians employed by the financial and construction sectors. The recent appointment of Bob Carr as a consultant to Macquarie Bank is merely the most brazenly visible manifestation of what is, in effect, NSW Inc (cf W.A. Inc).

    As an aside, Macquarie Bank has shown itself an equal opportunity employer, hiring Max Moore-Wilton when he resigned as head of the RTA under the Greiner Government and Bruce Baird when the Fahey Government was defeated.

    The Carr government’s behaviour was the antithesis of transparent government, with crucial information firewalled behind “Cabinet in Confidence” and “Commercial in Confidence” designations.

    The RTA didn’t properly assess it, or design it. It turns out that the consultancy used to estimate traffic volumes pulled numbers out of the air, arguing that peak traffic flows could be relied upon 24/7.

    But there is something deeper going wrong that people should think about. The pot of money available for transport infrastructure in Sydney is finite. Every dollar that is spent building road infrastructure is money that can’t be spent on public transport infrastructure, particularly light and heavy rail.

    The worsening consequences of what has been a bipartisan consensus favour road or public (and active) transport have become apparent in Sydney’s chronic traffic congestion which is now imposing an economic cost on the order of several billion dollars per year.

    Since 1998, VKT (vehicle kilometres travelled) has been growing at twice the rate of population growth. It is showing no indication of slowing down. A commitment from the Carr government’s 1998 Action for Air policy document that VKT growth would slow to the rate of population growth by 2011, and stop growing by 2021 was quietly dropped altogether from the 2006 revision. (The 1998 and 2206 policy documents make for an interesting comparison. All the imperative language has been expunged from the 2006 document, along with targets and measurable outcomes.)

    Induced traffic, whose existence the RTA doesn’t acknowledge, is euphemistically used to justify the next “missing link”. Entire swathes of Sydney, especially the fast growth north west, have no ready access to rail (light or heavy) and the RTA has refused to prioritise bus movements at intersections so that the NSW government’s touted bus transitways are just roads that a few extra buses run along.

    The PPP-induced mis-allocation of funds in favour of roads over public transport has left Sydney poorly placed to deal with Peak Oil and climate change. The recent announcements by Michael Costa and Morris Iemma show that nothing has changed in the NSW government’s mindset.

  21. John Bignucolo
    December 12th, 2007 at 22:00 | #21

    *sigh* that should be:

    The worsening consequences of what has been a bipartisan consensus on favour road over public (and active) transport have become apparent in Sydney’s chronic traffic congestion which is now imposing an economic cost on the order of several billion dollars per year.

  22. John Bignucolo
    December 12th, 2007 at 22:02 | #22

    *aahhh* always a mistake to post when one is tired:

    consensus in favour road over public (and active) transport have

  23. Spiros
    December 13th, 2007 at 09:44 | #23

    John B, your objections to the cross city tunnel are that the processes in the deal were poor (well, it is New South Wales) and that the money would have been better be spent on public transport.

    But it was private money. They invested in the tunnel, and unfortunately for the investors, it was a bad investment. There was no public money that might otherwise have gone into public transport spent on the cross city tunnel. Whatever anyone might think about the tunnel as transport policy, it wasn’t bad fiscal policy by the state government, unless there are contingent liabilities in the contract that haven’t yet been revealed.

    A logical conclusion to your argument is that the government should have alternatively done a deal with private investors to invest in public transport.

  24. crocodile
    December 13th, 2007 at 11:33 | #24

    Spiros,

    Private money or not, it was bad fiscal policy. Unfortunately, in this day governments of all stripes in this country are terrified of the word defecit. It’s almost like a pox on the financial management credentials of treasurers. In NSW, with an annual budget of around 40 billion dollars, what could possibly of been so diabolical for our illustrious treasurer to announce on budget night that this years budget was going to be 40.68 billion dollars. And we’re gonna build a tunnel. Because of this fanatical zeal to continually run surpluses forever we end up with lemons like the tunnel fiasco.

  25. Spiros
    December 13th, 2007 at 11:51 | #25

    Crocodile, if the tunnel is a lemon, isn’t it better that it should be private investors who took the hit, than tax payers?

  26. crocodile
    December 13th, 2007 at 12:34 | #26

    Spiros, the tunnel itself is not a lemon. It is in fact a wonderful piece of engineering and a much needed roadway. The lemon is in the way it was funded, the way other roads were closed off and the fact that the tolls are so high that not enough people make use of it.

    It is no better that private investors took the hit. This will only mean that at the next investment opportunity they will add a premium to their risk and one way or another we will all pay for it.

    There was no logical reason why this project could not have been undertaken in a more traditional manner.

  27. John Bignucolo
    December 13th, 2007 at 12:52 | #27

    John B, your objections to the cross city tunnel are that the processes in the deal were poor (well, it is New South Wales) and that the money would have been better be spent on public transport.

    Spiros, my objections aren’t only to the processes, but also to the outcomes. Which I think were poor for the community. Good processes don’t guarantee good outcomes, but bad processes almost guarantee bad outcomes. I certainly acknowledge that I would like to see much more money being spent on public transport infrastructure in NSW.

    For a jaw dropping example of bad process leading to a bad fiscal outcome, we have the Sydney Morning Herald reporting on the NSW Auditor General highlighting anomalies in the funding of the Sydney Harbour Tunnel . The opening ledes of the article:

    TOLLS from the Harbour Bridge are being used to prop up the privately owned Sydney Harbour Tunnel, it emerged yesterday as the NSW Auditor-General warned the tunnel was struggling financially because of rising costs and fewer cars using it.

    Motorists are abandoning the tunnel and instead using the bridge. At the same time the tunnel’s operating expenses are rising, prompting a warning that the Roads and Traffic Authority needed to reassess its interest-free loan to the tunnel company.

    The tunnel company’s expenses are more than $95 million a year while toll receipts have fallen to $43.7 million, a report from the Auditor-General said, leaving a shortfall of $52 million which is picked up by those use the Harbour Bridge.

    In the latest blow to public-private partnerships touted by the Iemma Government as a fix-all for funding the state’s infrastructure, the Auditor-General has found that the tunnel company could struggle to repay its loan to the RTA.

    The RTA lent the company $223 million in 1992 to be repaid in full in 2022, but the Auditor-General urged the RTA to reassess whether the company would be in a position to repay it in light of its losses.

    I know it’s tempting when you read this to just to roll your eyes and put it down to the debased ethical standards in NSW, but it shouldn’t be this way.

    But it was private money. They invested in the tunnel, and unfortunately for the investors, it was a bad investment. There was no public money that might otherwise have gone into public transport spent on the cross city tunnel.

    You’re correct in the narrow sense that it was nominally private money. But the implication behind the continual reference to private money that it was only a bunch of rich guys tossing in loose change they wouldn’t miss if things went south isn’t correct. There were millions of dollars of superannuation funds invested.

    There was also public money involved, because the RTA spent millions of dollars reconfiguring surrounding roads to feed traffic into the CCT.

    And taxpayers have also taken a hit because the funding arrangements for the CCT, and like projects, depend upon concessional taxation measures first introduced under the Keating government and extended by Peter Costello. This enables the projects to pay an attractive income stream despite extremely high debt loads, toll income that barely covers interest payments, and high upfront fees paid to financiers whose creative financial engineering kicked off the project in the first place.

    A logical conclusion to your argument is that the government should have alternatively done a deal with private investors to invest in public transport.

    Unfortunately, investing in public transport isn’t as attractive as investing in tollroads. There is less scope, and certainly less political will, for modifying the surrounding physical transport infrastructure to maximise the potential patronage for the project.

  28. Spiros
    December 13th, 2007 at 12:55 | #28

    “There was no logical reason why this project could not have been undertaken in a more traditional manner.”

    Suppose it had proceeded in a more traditional manner. The government would still have had to get some estimates of the number of vehicles that would use the tunnel. If they had received the same advice as the private owners, 90000 vehicles per day, then the government would have been stuck with the huge financial losses, because only 30000 vehicles use it.

    And it’s not the tolls that are to blame. During the toll free period there still only 50,000 vehicles per day using it, not nearly enough to make the tunnel financially viable.

    If the government had received the correct advice that only 30000 vehicles would use it, then the tunnel would never have been built.

    As it is, this “wonderful piece of engineering” did get built, and it got paid for by some Hong Kong investors. Thanks guys.

    Will this deter future investors or make them add a premium to their price? I doubt it. Private investors are still piling in to infrastructure projects including roads. The cross city tunnel was a financial dud because the traffic forecasts were wrong. But that’s not been the case with other private roads. You win some, you lose some.

  29. Spiros
    December 13th, 2007 at 13:04 | #29

    John B, the Harbour tunnel is indeed a terrible deal for the government and tax payers of NSW, for which we can thank Nick Greiner. As I understand it, he pushed his public servants to get the deal done, for the sake of getting a deal done, and being completely inexperienced with these things, got taken to the cleaners. The same was true of Port Macquarie Hospital.

    If superannanuants lost money in the CCT, then that is something they can take up with the trustees of their super funds. But if you put your super money into equities (which is a good thing to do over the long term) then some of those investments are not going to work out.

    I agree on the tax angle, which creates huge incentives to load up on tax deductible debt, and allows private investors to pay a premium to state governments for privatised assets. It’s effectively a transfer from the Commonwealth to the states. Wayne Swan might care to take a look at it, but he’ll be inviting the mother of all fights with the states if he does.

  30. John Bignucolo
    December 13th, 2007 at 13:22 | #30

    John B, the Harbour tunnel is indeed a terrible deal for the government and tax payers of NSW, for which we can thank Nick Greiner. As I understand it, he pushed his public servants to get the deal done, for the sake of getting a deal done, and being completely inexperienced with these things, got taken to the cleaners. The same was true of Port Macquarie Hospital.

    Actually, we have Laurie Brereton to thank for the Sydney Harbour Tunnel. I may be misremembering this, but its my understanding that the Sydney Harbour Tunnel proposal actually failed the planning requirements under the NSW government’s cost-benefit analysis. However, Laurie Brereton determined to build the tunnel, rammed a special measure through Parliament to get the tunnel built. We can’t blame the bureaucrats for this mess.

  31. Spiros
    December 13th, 2007 at 13:47 | #31

    John B, you are right about the tunnel. Construction commenced in 1987, the year before Greiner became Premier.

  32. kyangadac
    December 15th, 2007 at 14:16 | #32

    Is it too late to mention Perth where a Labour government is about to open the new electric Perth to Mandurah railway, the second new railway line to be built in the last 20 years. As well Perth has an extensive and well planned bike network, bus lanes on all freeways and major roads. All this despite WA Inc. suggests that some other factors beyond the usual suspect of corruption may be at work.
    In W.A. much of the progress in transport infrastructure can be attributed to one good man, Professor Peter Newman at Murdoch University.

  33. Trish Hunt
    September 18th, 2008 at 23:55 | #33

    Wran the only decent Labor leader? Wran is the very reason why we have these stupid tunnels and a terrible freeway system.

    If he had kept the freeway road corridors that were resumed off the citizens of NSW in the 1950′s and 1960′s instead of selling them to his property developer mates at a steal (so much for him being anti-development!) then we would not have had to shunt billions into building tunnels that cannot be expanded and have to be closed every time there is a minor accident.

    Before anyone says that the money should be spent on public transport instead of roads, well think of how much would be saved if tunnels did not have to be built. Think of all that money being spent on public transport.

    For example, the Warringah Freeway would have cost Wran $66 million to complete. It was meant to be part of an integrated rail/road transport corridor, the Warringah Transport Corridor. If Wran was so green then why no train line to the Northern Beaches, which Justice Kirby recommended? Building a tunnel today would cost over $1 billion and this doesn’t include extensions to Wakehurst Parkway which the original plans included, or a dual rail/road bridge like the Sydney Harbour Bridge.

    Wran left Sydney with a terrible legacy. A crap road system that costs too much to fix. Money that should be spent on public transport is instead spent on trying to fix up roads where there is no room for expansion leaving only very expensive options available.

    Integrated transport solutions means mixing road, rail, bus and tram. We need them all, not one at the exclusion of all others as so many seem to be focused on. To pretend that there is a single cure all is to present a myopic view which is what has caused the terrible unsustainable transport system that we have in Sydney today.

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