Thanks to Mark O’Connor for this article, preceded by his comment.
That’s not quite what the Melbourne Age’s economics editor Tim Colebatch is saying, but he comes close to it when he writes today:
…since Labor took power, Victoria’s population has grown by almost a million, close to 20 per cent. For those living in Victoria, hospital wards became overloaded, trains overcrowded, roads clogged. Assault rates rose, for several reasons, and people felt less secure. The cost of electricity, gas and water soared, mostly for reasons unrelated to state government. Labor made some mistaken choices that proved expensive. And it developed a habit of being less than honest with Victorians
What is missing, which would connect his analysis to the population issue, is Jane O’Sullivan’s point. In an article in On Line Opinion (www.onlineopinion.com.au/view.asp?article=10137&page=0) which I have yet to see refuted, she argues that when population growth approaches 2% a year we hit a financial barrier.
Infrastructure costs for each extra person added to the community are in the low hundreds of thousands of dollars (William Bourke has argued they may approach $500,000 per person — see www.abc.net.au/unleashed/39930.html). So, if conditions are not to deteriorate for everyone, the extra infrastructure must be added as or before the extra person arrives. But at 2% annual population growth, O’Sullivan argues, this becomes simply impossible. Around 25% of all GDP would have to be invested each year in infrastructure ¬ and that’s more money than can be got out of the taxpayers and the consumers of public services.
Result? well exactly as Colebatch describes ¬ except that he doesn’t make explicit the connection with population growth. I don’t blame him for that. There’s a limit to what a journalist can put in any one article ¬– one big idea per piece is what most of them work on. And Colebatch does describe vividly the dilemma Victoria’s new government faces, between the priority to reduce debt and the priority to restore services.
Perhaps in a future article he will explain why this dilemma is so acute, and what population policy might do to mitigate it.
Sydney Morning Herald
November 30, 2010
Ted Baillieu’s patient work has put him in charge of Victoria. Now he needs to somehow fix services without raising taxes.
THE Bracks/Brumby government has fallen after 11 years in office. The Kennett government fell after seven years. The Cain/Kirner governments lasted 11 years, taking over from the Hamer/Thompson governments, which ruled for almost 10 years. It’s a consistent pattern.
The days when we had a natural party of government are over.
What is natural now is to stay in power for a decade or so, two or three terms, before being overwhelmed by the accumulation of frustrations, disappointments and anger by voters at this or that.
That’s the central lesson of the unexpected electoral landslide that has swept Labor from office. On most tests, it was not a bad government. Victoria is widely seen by the rest of Australia as being one of the better-run states: pro-business, socially progressive, strong in education, a national leader in jobs creation and housing activity, and generally humming with growth.
But since Labor took power, Victoria’s population has grown by almost a million, close to 20 per cent. For those living in Victoria, hospital wards became overloaded, trains overcrowded, roads clogged. Assault rates rose, for several reasons, and people felt less secure. The cost of electricity, gas and water soared, mostly for reasons unrelated to state government. Labor made some mistaken choices that proved expensive. And it developed a habit of being less than honest with Victorians, and trying to manipulate, hide and spin its way out of trouble rather than being upfront about problems. In the end, they all hurt.
Now it is Ted Baillieu’s turn. Today he and his frontbench will be transformed from poachers to gamekeepers, from fanning voters’ discontent with state government services to trying to dampen it, from making them think services are bad to making them think services are good.
When a train derails or an ambulance fails to arrive, when an emergency ward leaves patients waiting, or when power prices rise, it will now be his government in the firing line. It will be a challenging transformation.
But Baillieu has got there by meeting tough challenges. It is no mean feat to end five years in the unenviable job of Opposition Leader with the public approving of your performance – and electing you to a landslide win. He has shown discipline and good sense in judging what issues to focus on, a progressive streak that defines him as a leader from the political centre, and a combination of careful planning and a willingness to take risks.
He will need all of that now. From today, he will confront the underlying reality that drove Saturday’s result: the central problem facing any state government is that it simply does not have the resources to provide services at the level its citizens expect.
A government can get by for a while by blaming the inadequacies on its predecessors, and creating a sense that the problems are being tackled. But in the end, that gap between its funding sources and the expectations of the public will defeat it.
It’s a global problem, but it’s particularly severe in Australia because we insist that taxes be low and see public debt as an evil to be avoided.
All government services must be paid for by taxes or equivalent charges. All government infrastructure must be paid for by taxes, or by borrowings to be serviced and repaid by taxes. If you want low taxes, if you want low or no government debt, then you have to accept worse government services and infrastructure than you would if we paid our governments more.
Public private partnerships allow governments to avoid debt, but not liability; they too have to be paid for and serviced, either by taxpayers or consumers. If you want Victoria to have better schools, better public transport, better hospitals, Victoria’s government has to invest more – and ultimately, raise taxes and charges – to deliver them.
Brumby as treasurer invested too little to improve services, focusing instead on debt reduction. As premier, to his credit, he changed tack, and embarked on a five-year plan to borrow about $25 billion and invest it in tackling Victoria’s infrastructure backlog: new roads, schools, hospitals, public transport, water projects and so on. He lost office too soon to reap the benefit.
One of the challenges for Team Baillieu will be to decide whether it sustains investment at that level, or reduces it to avoid threatening Victoria’s AAA rating. It will be criticised whichever it does. But it knows that simply changing the state’s managers does not solve the problems they have campaigned on for a decade. They have to do things differently – and in many areas, they will have to invest more, and spend more on maintenance to get rundown assets such as Melbourne and Victoria’s rail systems into reliable working order.
It also needs to take care on what it commits to. In the campaign, it pledged
to investigate new rail lines to Tullamarine airport, Doncaster, and connecting Geelong, Ballarat and Bendigo. Yet it committed to build one new line: of all things, a $250 million rail link to Avalon Airport.
OK, as white elephants go, it’s only a mid-sized one. But when there are so many urgent needs in public transport, why waste taxpayers’ money on this one?
Shadow Treasurer Kim Wells declared during the campaign that a Coalition government would require all large new infrastructure projects to have their business case assessed by the Department of Treasury and Finance, with the assessment made public. That’s an excellent idea, and one that would help protect a Baillieu government from its own desal disasters.
John Brumby can leave politics proud of what he achieved. Ted Baillieu can enter the great challenge of his career with quiet pride in what he has achieved to get there.
He will need all that self-discipline, understanding, wary intelligence and a streak of boldness.
Wish him luck.
Tim Colebatch is economics editor.
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