Tale of two states - Budget edition

The crystal clear NSW and Victoria contrast continues on after budgets made this month. By Tim James.

In mid-July Watercooler reflected on the key differences between NSW and Victoria in handling the pandemic and its effects. There were clear departures in approach, application of resources and longer-term government agendas.

Five months on, and with both state governments having just delivered budgets, it’s timely to see a similar comparison of how our two most populous states are being managed. And indeed how much government management is affecting each state’s circumstances, economy and prospects. 

The results are illuminating, if not alarming. 

First, and as carried out in July, a few key points of foundation for this comparison. Victoria has a population of about 6.7 million people, NSW about 8.2 million. Pre-COVID economic forecasts are poignant here given the shifting landscape since. Victoria’s budget last year forecast for the 2020-21 year growth of 2.75%, unemployment of 5% and debt of $47bn. NSW’s budget last year forecast growth of 2.5%, unemployment of 4.5% and debt of $23bn. Note the similar forecast growth rates. 

The pandemic has changed this landscape markedly in both states. Yet enormous differences now exist in the fiscal and economic positions of NSW and Victoria.

Here are some critical points of difference after both budgets were handed down in November. 

NSW is forecasting negative growth (in GSP) this year of -0.75%, while Victoria forecasts -4.00%.  About three percentage points difference in GSP growth difference speaks volumes.

NSW is projecting a deficit of $16bn in 2020-21, Victoria $23bn. It’s no wonder the Victorian Opposition are declaring that the recent Victorian Budget borrows more than any in Victorian history. 

NSW’s net debt next year is projected to be $53bn, up from $19bn this year.

Victoria’s same debt figures respectively are $87bn, up from $44bn this year. Not far from twice the level of indebtedness. 

NSW is forecasting unemployment this year of 6.5%, Victoria 7.75%. NSW’s greater focus on maintaining economic activity has made a material impact. 

These numbers, and many others, clearly convey the contrast here.  And the actual figures may well turn out to be much worse in Victoria after what has been during and since the second lockdown. 

So what has magnified these differences so dramatically? 

Much of it lies in the making of decisions by government. 

There’s the widely reported action and inaction of government (the latter largely in Victoria) in relation to effective monitoring, testing, tracking, tracing, quarantining and many further pandemic protection measures. 

There’s been a vastly different stance on a second lockdown in which NSW has contained outbreaks and learned to live with the virus while Victoria was forcibly locked down for a further four months. 

There’s the extent to which each government has invested in systems, structures, staff and strategies that deliver results. NSW is without doubt well ahead on service delivery, which is so much the core role of state governments across Australia. The investment, innovation and development in NSW service delivery, as Minister Victor Dominello wrote and outlined to Watercooler here has been essential to NSW meeting the COVID-19 challenges. 

There’s the extent to which each government has invested in infrastructure to deliver improvements and productivity gains. The contrast here can be seen in NSW currently investing in an infrastructure pipeline of $107bn (which generated 145,000 jobs last year) while Victoria has this year allocated $19bn to infrastructure (and this is much more than previous years). 

Even the titles of the two budgets say something about government in each state. NSW’s “Creating jobs and securing our future” is a more compelling case than Victoria’s: “Putting people first”.

It can’t be ignored that both states this week have lost their AAA credit ratings. There’s no doubt though that NSW will get it back much more readily and quickly compared to those south of the border. 

It’s now months on from the making of massive COVID-19 related decisions by our two largest state governments, and the contrast is clear. NSW is making it happen while Victoria is mired in debt and deficit following mistakes too often of its government’s making. 

While business and enterprise will strongly shape the staging and pacing of post-pandemic recovery, the role of government cannot be underestimated. This comparison between NSW and Victorian governments gives a salient lesson in policies and management.  

Did you know that Dan Andrews earns $33,000 more than Gladys Berejiklian each year? It’s another thing altogether to earn it given the current state of the states.