Credit Rating

Credit Rating Is Treasurer's Priority

13 October 2008

THE NSW Treasurer has warned of higher taxes and falling corporate investment if the state loses its AAA credit rating, but business chiefs said strategic spending on transport and infrastructure was more important.

Eric Roozendaal's comments came as the Premier, Nathan Rees, said the State Government's penny-pinching on infrastructure and services could cost Labor next Saturday's Ryde byelection. Cabramatta and Lakemba were not guaranteed wins either, he said. Voters in Port Macquarie also go to the polls next Saturday.

Polling published yesterday predicted a swing of more than 20 per cent away from Labor in Ryde.

Senior departmental officials met members of cabinet yesterday, exactly one month before the mini-budget, to comb the state's expenses sheet for ways to pare back spending.

Mr Roozendaal foreshadowed deep cuts to the state wages bill, including cuts to ministerial and departmental staff, and warned of dire consequences if the state's credit rating was not protected.

"If we do suffer a downgrade, business when thinking about investing in NSW or another part of Australia will say, 'Well, if NSW's credit rating is dropping they'll need to take steps either to increase taxes, or cut services,"' he said. "Therefore [they] might want to invest in a different state."

The executive director of the Sydney Chamber of Commerce, Patricia Forsythe, said protecting the AAA rating could give NSW an advantage over parts of the world affected by financial turmoil, but warned that business would not invest in a state with a crumbling transport system.

"The infrastructure is just so critical. It's a source of jobs and opportunities for business and we are rightly criticised in Sydney because our transport is not up to scratch.

"By putting investment off we are not solving the problem.

"If they are going to make cuts, we can accept that, but do it in a strategic context. The Government has to spell out its plans, you have to be able to say to companies what the longer-term opportunities will be."

Ken Morrison, of the NSW Property Council, said the Government should not be scared of borrowing to invest in infrastructure.

Mr Rees blamed "a very serious international situation" for NSW's financial problems but said front-line public servants such as police, teachers and health workers would be "quarantined" from the razor gang.

"I'd much rather we didn't face this set of circumstances, but I could whinge about it or get on with fixing it. The sooner we make the hard decisions, the sooner we get back on top of things."

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