RANNSACKED – THE FINANCIAL LEGACY OF MIKE RANN AND KEVIN FOLEY
[In this is the third and final part of the Special Kryztoff Investigation into the condition of this State’s Finances in the wake of the Rann / Foley Years, we look at the real financial legacy of former Premier Mike Rann.]
For Part 1 – see www.kryztoff.com/RAW/?p=4218
For Part 2 – see Part 2 – Debt Balloons
The Real Rann Legacy
As Premier Mike Rann looks to lock in favourable measures of his legacy, the reality is that his government has created a financial mess to rival that which followed the State Bank debacle nearly 20 years ago. Indeed, the money that has been lost since the GFC (three years) is between 50% and 100% more than the losses of the State Bank that brought us all to our knees 20 years ago. Accordingly, this debacle may well be referred to as State Bank 2.0.
However, the big difference now is that the government has many fewer assets to dispose of to get debts down.
Hence, we are seeing plans to rid the State of everything that remains – lotteries, timber forests and public land through dodgy sales to developers – and more slugs on everything to get its revenue base up, from car parking fees at hospitals, means testing kids’ income for Housing Trust rents to big hikes (again) in property taxes.
The State Budget has ballooned in size and, in the absence of any fiscal restraint or rethink in the wake of the GFC, debt and unfunded liabilities have now doubled since Rann came to power and have increased by $8 billion in the past few years.
But where has the money gone?
Expenditures that increase debt can usually be justified on new infrastructure that will increase the state’s productivity, income and employment. But where is that new infrastructure – bridges, ports, highways and the like? About all one can think of amongst the ubiquitous claims of ‘world class’ of the past nine years are an expressway, an underpass, a tram extension and new film studios.
It should also not be forgotten that none of the costs of the new Royal Adelaide Hospital, Adelaide Oval and the desalination plant are included in the blow outs of budget size and debt of the past few years.
Bottom Line
If you wish to sustain a AAA rating, one needs to either reduce debt in the good years or keep raising new revenues so the rating agency ratios can be sustained.
If you never plan for rainy days, you will keep spending just about everything that ever comes in and talk down critics of the increased debt by saying you are doing the things necessary for future growth – leaving the debt as something that will somehow take care of itself in due course.
If no one ever does the basic research, you can get away with massive losses incurred during the GFC without ever having to answer any difficult questions about how much was lost across all of the government and what impact it will have on the state’s future.
If you wish to feign an image of prudence and responsibility, one can always project rose-coloured figures into the future and hope the reality of the past escapes scrutiny.
If you wish to bluff your electorate, S&P and the media, you keep up a blitz of feel good announcements and trumpet the merits of your Treasurer.
If you do all these things, you are called the Rann Labor Government 2002-2011.
Indeed, as Kevin Foley recently said, and as he and Rann slide off into the unknown, “F**k, we were good”.
Can we expect new Treasurer Snelling to have the smarts to fix this mess? Recently he stated, “$4.2 billion is not a lot of money. It is like the average person having a $26,000 debt.’”Well, if his credit card analogy and his views of $4.2 billion don’t worry you, then his $26,000 figure should. He got his maths wrong by a factor of 10!
Do we think the Liberals will nail the government on this? Well, Opposition Finance spokesman, Iain Evans on ABC radio during the week of 27th September stated the state debt at $8 billion. It would not appear he has bothered to spend much time reading the Budget papers at all.
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