Gone with the wind

an otherwise clear-headed government stumbled badly on energy policy. BY NIck Cater.

As the polls closed in Muswellbrook an hour before sunset, Liddell Power Station, 20km away, was running at full tilt. At 6pm it was generating around 12 per cent of the state’s electricity. Wind turbines were contributing 9 per cent and hydro 6 per cent. Solar panels and batteries were contributing nothing at all.

Keeping the beer chilled when Liddell closes next month is no longer Dominic Perrottet’s problem. The defeated premier’s place in history, however, will be determined by what happens next, as will the legacy of his three Liberal predecessors. This is unfortunate since NSW has been governed outstandingly well in almost every respect since the Coalition came to power 12 years ago. Were it not for the imminent closure of Liddell, this column might have begun by marvelling at the transformation of NSW during the most intense period of infrastructure investment in any state since the late 19th-century railway boom.

A vast network of underground motorways has been planned, funded, constructed and mostly finished since Barry O’Farrell’s victory in 2011. Sydney is home to the longest continuous road tunnel in the civilised world if we leave out Norway. The public transport network has improved beyond measure. And then there’s Sydney Metro, which by 2030 will consist of four metro lines, 46 stations and 113km of new metro rail.

When premier Chris Minns cuts the ribbon on the CBD-to-Chatswood section sometime next year, Metro envy will replace Harbour envy among Melbourne’s huddled commuters. By imagining a clean, fast, driverless train that arrives every four minutes and gets from a distant suburb like Dandenong to the shores of a gleaming harbour in half an hour, Victorians will know how good life could be if they only live in Kellyville, NSW.

So what’s the catch? None, really. The projects have been financed with a combination of creativity and prudence that was unimaginable in the public sector before the NSW government proved it could be done. The sale of old infrastructure and unused government land got the ball rolling. The largest road project, WestConnex, began life as a government entity but was later sold for a healthy profit providing funds to fund more projects.

Metro Rail is being paid for from government funds, but much of that will be recouped through value capture, as the government sells land for development on and around new stations at a price increased by the presence of new infrastructure.

A century ago, the investment in railways was sending NSW broke, even as the rail lines were being rendered redundant by the internal combustion engine. Yet Minns inherits a balance sheet far healthier than Victoria or Queensland. NSW’s net debt is forecast to rise to 14 per cent of gross state product by 2026. Victoria’s debt by then will be 26.5 per cent. NSW’s budget is predicted to be in surplus by 2024-25. Its southern neighbours would be safer putting their money on the Western Bulldogs winning the AFL grand final than a budget surplus in Victoria anytime this decade.

If the fate of governments were decided by fiscal economists, engineers and policy nerds, Perrottet would still be premier. He was the inheritor not only of an infrastructure boom he had helped shape as treasurer but of a culture of service created by Barry O’Farrell. Again, the contrast with Victoria is stark. NSW has been governed by servants; the current Premier of Victoria behaves like a ruler. While NSW entered the pandemic with the benefit of a decade of public sector reform, Victoria entered it with Andrews, who with some help from some of his counterparts in other states, did an outstanding job of making Gladys Berejiklian’s government look good.

Public sector reform is never sexy. It seldom hits the headlines until it goes wrong. Yet, remarkably, almost every interaction between the NSW government and its citizens is easier and less unpleasant than it used to be. Visitors to Brisbane from Sydney puzzle over where to buy a ferry ticket and why they can’t simply tap their credit card. Were they to move to WA they might wonder why the ServiceWA app displays your digital vaccination certificate but not your driver’s licence or registration papers.

NSW is acknowledged as an exemplar for public sector reform around the world. It has been achieved without the brutal privatisation of services that frequently comes with unintended consequences. Instead, NSW has pioneered the introduction of competitive tension, encouraging government departments and agencies to behave as if they are competing for business with external providers. The results are consistent: more effective services provided by a more efficient and much happier workforce.

Should the history of NSW government 2011-2023 be of any interest by the time the panic over climate change has subsided, historians will be forced to wrestle with a peculiar paradox. How could such a clear-sighted, level-headed government become complicit in the biggest public policy failure of the century?

Where did its good judgment on infrastructure investment go when it came to the provision of energy? We knew Liddell would be prematurely retired before the last election. Blackouts in the National Electricity Market – or load-shedding, as the bureaucrats prefer to call them – are already happening. Yet the NSW government convinced itself the answer to all this was more wind turbines and solar panels. Instead of preparing a plan to extend the life of Liddell or fast-track the arrival of gas, the Coalition went to the election with the nonsense policy of a $1.5bn Clean Energy Superpower Plan. Treasurer Matt Kean was right that subsidising more rooftop solar was “a no-brainer”, but not in the sense he intended. He was flat-out disingenuous when he blamed the state’s energy problems and rising electricity prices on Vladimir Putin’s war in Ukraine. NSW imports no gas from Russia to the best of anyone’s knowledge but it is forced to import a lot from Queensland while Santos goes through the groundhog day of clearing regulatory hurdles to draw gas from the Pilliga scrub.

Meanwhile, the world’s largest coal exporting port at Newcastle is handling the equivalent of a year’s supply of coal to Liddell every fortnight. The NSW government is enjoying a $6bn bonanza this financial year in royalties. Yet here we are with industry-killing energy tariffs and an electricity network in constant danger of failing.

The situation is even more bewildering because of the thoughtful and long-sighted approach that rewarded the Coalition with its longest-ever period in government. None of the last four premiers has been particularly presidential, least of all Berejiklian, whose 1706 days in office made her the second-longest-serving Liberal premier of all time.

Modesty and a broadly collegiate approach to the task of public sector reform may account for the government’s ability to survive the disruption of revolving doors. Perrottet’s misfortune was to be handed the task of winning an unprecedented fourth-term mandate for the Liberals barely 18 months into the job. He deserves credit for leading NSW out of the lockdown into which it should never have gone.

If only he’d been able drag his party clear of the even greater mistake of pretending coal and gas could be replaced with intermittent, dilute sources of power. The reckoning for that blunder now falls on his successor.