Bills must rise to fix state of disrepair

By Gerard Noonan
October 28, 2004

Charges for water, electricity and other services are likely to rise because the NSW Government has seriously undervalued the cost of upkeep on government facilities, the state's financial watchdog has warned.

The NSW Auditor-General, Bob Sendt, has looked at seven water and electricity agencies and says "clouds are gathering" because of a widening gap between cash flows and the cost of replacing pipes, dams, and electricity power stations.

"This gap [for the seven agencies] has risen from approximately $6.6 billion at 30 June 2002 to $13.9 billion at 30 June 2004," Mr Sendt said in his annual review of the state's budget and accounts.

Generally, public enterprises supplying water and electricity to NSW residents were not earning enough to replace assets.

"Their charges may have to increase or they may have difficulty maintaining services," Mr Sendt said.

The Premier, Bob Carr, would not rule out increased charges for basic services over the next decade. "No responsible government can commit to freeze charges for the next 10 years," he told Parliament.

State-owned agencies have protested at the squeeze put on them by Treasury to provide increased payments into state coffers from their consumer fees

They have repeatedly complained to the Government about the strain the rake-off that has put on their ability to set aside adequate funds to refurbish their plant and equipment.

Overall, the Auditor-General found there was a difference between the value the Government puts on assets in the state budget and the cost of replacing them.

"The difference is in excess of $10 billion and would require funding over the remaining life of these assets," Mr Sendt said.

The Opposition leader, John Brogden, said the Auditor General had revealed an astonishing accounting blunder.


But it wasn't all bad news for the Government. Mr Sendt gave a thumbs-up to the state for retaining its blue-chip AAA credit rating.

It also gave a tick to the Government for paying off $6.5 billion of state debt since 1999 and cutting the size of its liabilities to WorkCover and public servant superannuation.

"It's in good shape but there are clouds gathering on the horizon," Mr Sendt said.

But Mr Carr challenged the watchdog's assessment, telling Parliament the Government was committed to spending $30 billion on new and refurbished assets over four years.

In a separate criticism, Mr Sendt queried why $172 million in grants were paid on the last day of the 2003-04 financial year even though they did not need to be paid until the following year.

"While made legally, the effect of these payments was that the 2003-04 budget surplus was $6 million rather than $178 million, and the budget for 2004-05 was estimated as a deficit of $379 million, rather than $551 million, other things being equal," he said.

Mr Sendt pointed out increased wages for nurses and teachers and a cooling housing market which placed at risk the continued growth of stamp duty would "challenge continued sound financial management" for NSW.

But outside Parliament, Mr Carr defended the budget juggling, saying it was prudent to shift money from a year when there was a surplus to a year when there was a predicted deficit, the first since his Government was elected nine years ago.

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