Friday, October 31, 2008

Selling The Farm

It’s old news that the New South Wales Government is confronting a budget crisis. Former Treasurer Michael Costa ran from office screaming about a billion dollar black hole after he failed to sell off the electricity industry, somehow suggesting that it wasn’t his fault. Now, it has been reported that if measures are not introduced to address the slide the deficit could crash through the $2 billion mark before the financial year is out. All the indications are that the mini budget to be unveiled within weeks will contain plenty of pain and no sweeteners.

It has been reported that the big ticket $12 billion North West Metro line announced by former Premier Morris Iemma will be axed completely. If that is the case, it will be completely consistent with the track record of the Labor Government over the past 13 years of announcing major rail projects that are never actually delivered. Even the Chatswood to Epping line which is nearing completion, and which is overbudget, overdue, fails to meet noise standards, and is too steep for modern trains, was originally meant to run all the way to Parramatta. Not one major rail project has actually been delivered, as promised.

With the budget black hole continuing to expand, it has been reported that the minibudget will also include plans to sell off more State assets. Yes, there are some left, but probably not for much longer. One of the few remaining assets that could raise a reasonable sum for the Government is New South Wales Lotteries. It is anticipated that the sale of the Lotteries office could raise about $1 Billion, going a long way towards plugging that budget black hole. But what happens after that?

New South Wales Lotteries is not just a valuable asset; it provides the Government with a very healthy source of income. Last year the return to the Government was $340 million. Revenue from lotteries is continuing to grow, even while other streams of revenue are falling due to the economic downturn. Selling the asset now is killing the goose that lays the golden egg. It is slaughtering the family cow for a week’s supply of meat instead of a lifetime supply of milk and cheese.

There is also the social equity argument about the morality of placing even more gambling revenue into the hands of private enterprise. But we’ve already gone so far down that track that it hardly seems to matter.

The real concern is that the Government is attempting to sell assets because it has run out of money. That prompts the big question of what happens when they finally run out of assets?

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