BAZZANOMICS

the truth behind the

Coalition’s economic
policies for NSW
Authorised by S Dastyari, NSW Labor, 377 Sussex Street Sydney.
UNFUNDED ECONOMIC PLAN SHOWS
BARRY O’FARRELL IS UNFIT TO MANAGE
THE NSW ECONOMY

NSW Opposition leader, Barry O’Farrell has conned NSW families with
$5 billion in unfunded promises.

Mr O’Farrell says the money for his $5 billion ‘Restart NSW’ infrastructure fund
will come from three sourcesi – all of which are ‘smoke and mirrors’ designed
to trick NSW families.

Bazzanomics Research Paper | NSW Labor | February 2011 1

 
1. Windfall tax revenues – Mr O’Farrell says he’ll use so-called ‘windfall tax
revenues’ to fund his promises. That is like a gambler promising to
repay his home loan from next week’s Lotto win. His proposal plumbs
new lows in fiscal irresponsibility. Never before in Australian history has an
Opposition Leader tried to fund election promises with phantom tax
revenues that are not even in the budget.

2. Waratah bonds – Mr O’Farrell is trying to trick families into funding his

promises by investing their superannuation in risky infrastructure bonds.
For decades Australia’s big super funds have refused to invest in this type
of high-risk construction projects.ii Mr O’Farrell’s plan to directly tap families’
self-managed super funds is an admission that he cannot convince the big
super funds to take on the risk of his projects. It is reckless and
irresponsible to be risking mum & dad’s self-managed retirement savings
on projects rejected by the big super funds.iii These bonds maximise the
risk for those persons least able to manage it.

From a public finance perspective, the issuing of Mr O’Farrell’s Waratah

Bonds is simply an inefficient way of raising debt. The Government raises
money through the issuance of T-Corp bonds to financial institutions. These
issuances are fully subscribed. It is unclear why Mr O’Farrell wishes to raise
more debt with a cumbersome and costly instrument that allocates risks to
families.

3. Lease of the desalination plant – Last but not least, Mr O’Farrell is

planning to fund his promises by raising $1.2 billion through a long term
lease (a sneaky form of back-door privatisation) of the NSW desalination
plant. But there’s a billion dollar hole in his plan because there’s more than
one billion still owing from the construction of the plant. After this is paid off,
there’ll be very little left-over for O’Farrell to get his hands on.iv

Bazzanomics Research Paper | NSW Labor | February 2011 2

 
Mr O’Farrell has no credible plan to fund his $5 billion in promises. His three
proposed funding sources are nothing more than imaginary revenues and
back-door schemes to raise more debt.

The real cost of his promises – more than $1,500 a NSW household – will
have to be met through higher taxes and charges on NSW families.

O’Farrell must immediately come clean and answer the following questions:

‐ Which taxes will he increase to fund his promises if there is no ‘windfall’

revenue over the next 4 years?

‐ Why should mum and dad investors be suckered into investing in risky
construction projects that the big super funds are unwilling to risk their
funds on?

‐ How much of the $1.2 billion proceeds from leasing the Desalination
plant will be left over after the debt is paid back on its construction?

Mr O’Farrell has presented the people of NSW with the most fiscally reckless
economic plan in a generation.

His irresponsible fiscal plans show exactly why he shouldn’t be trusted to

manage NSW’s $400 billion economy.v

Bazzanomics Research Paper | NSW Labor | February 2011 3

 
SLOPPY EMPLOYMENT PLAN SHOWS
O’FARRELL IS UNFIT FOR NSW’S TOP JOB

This is the O’Farrell employment merry-go-round

Mr O’Farrell’s ‘Jobs Action Plan’ has a huge hole in it.

The plan claims it will “create 100,000 new payroll tax paying jobs for NSW”vi
by offering a payroll tax rebate to the first 100,000 additional employees put on
by NSW businesses.

If every new employee hired by a NSW business came from the

unemployment queues then this might be a credible claim. But Australian
Bureau of Statistics data shows that most of the people hired for new jobs in
NSW aren’t unemployed, they are just moving between jobs.vii

So Barry O’Farrell’s plan would pay millions of dollars not to ‘create

jobs’, but just to move workers around from one job to another.

At $4,000 per new job, the plan could waste up to $400 million on an
employment merry-go-round.

Bazzanomics Research Paper | NSW Labor | February 2011 4

 
Even worse, the plan could actually reduce employment.

Under the plan, a new employee only qualifies for $4000 if the job is “a
genuinely new position. This will be defined as an increase in employee
numbers over and above the highest number of NSW employees at the
company over the last 12 months.”viii

This will mean that when a business loses a worker to retirement or to start a
new job, the Liberal plan will create a powerful incentive for the business to
wait 12 months before hiring a replacement. If the business waits 12 months
before rehiring, the new employee will qualify for the $4000 subsidy. ix

Money for the big end of town

Recent Government increases in the payroll tax threshold mean that now,
more than 90 per cent of NSW businesses do not pay payroll tax. Only the
businesses with a payroll over $658,000 will benefit from Mr O’Farrell’s
scheme. That means there are some 640,000 smaller businesses in NSW that
will not benefit at all from Mr O’Farrell’s scheme.

Mr O’Farrell is blowing $400 million in handouts to the big end of town and
ignoring small businesses.

Bazzanomics Research Paper | NSW Labor | February 2011 5

 
Sloppy figures

The Liberal ‘Jobs Action Plan’ has a glaring miscalculation at the heart of it.

The Liberals claim that by creating 100,000 jobs, their plan “will reduce the
NSW unemployment rate by up to 0.3 per cent.”x

The current unemployment rate in NSW is 4.85 per cent (there are 184,000
people unemployed from a total state labour force of 3.8 million).xi So if Mr
O’Farrell’s plan really did create 100,000 jobs it would slash unemployment
from 184,000 to 84,000. That would be a reduction of more than half all
unemployment; not just 0.3 per cent.

A reduction in NSW unemployment of 0.3 per cent would imply the creation of
just 11,000 jobs, around ten times less than the 100,000 jobs claimed
elsewhere in the ‘Jobs Action Plan’ document.

Mr O’Farrell must answer the following question: is this slip-up an admission

that his policy won’t create anywhere near the 100,000 new jobs he has
claimed; or a sloppy error in his figures?

Either way, it’s the kind of shoddy mistake which shows why Mr O’Farrell
cannot be trusted with the $400 billion NSW economy.xii

Bazzanomics Research Paper | NSW Labor | February 2011 6

 
NOTES & REFERENCES
                                                            
i
NSW Liberals & Nationals, “Restart NSW: A Fund to Fix NSW”, Policy Document, page 2. 
ii
Australian superannuation funds have a long history of under investing in greenfields infrastructure
projects so as to limit their exposure to construction risk. When Australian Super funds invest in
infrastructure they predominantly choose to acquire existing assets after construction has been
completed. See: Tim Blue and Nicola Berkovic, “Superannuation funds spurn local infrastructure
investment”, The Australian, November 23, 2009. 
iii
Barry O’Farrell said on 10 June 2010: “[Waratah bonds] will enable mum and dad investors to help
make a contribution to the task of delivering the essential infrastructure NSW needs.” And, rather
than reduce the risk by spreading it across a number of projects, the plan is to have mum and dad
invest in individual projects. O’Farrell said that Waratah bonds will be “directed to specific, essential
infrastructure projects.” 
iv
The Sydney Desalination Plant cost $1.65 billion to build (see Sydney Water Desalination Plant
Fact Sheet) and the plant still has $1.1 billion of debt on its balance sheet (see Sydney Water
Statement of Corporate Intent 2010-2011).  
v
Gross State Product of NSW in 2009-10 was $407 billion (Australian Bureau of Statistics).  
vi
NSW Liberals & Nationals, “Jobs Action Plan”, Policy Document, page 4,
http://www.nsw.liberal.org.au/index.php?option=com_k2&view=item&task=download&id=50 
vii
Australian Bureau of Statistics, 6209.0 - Labour Mobility, Australia. 
viii
NSW Liberals & Nationals, Jobs Action Plan, Policy Document, page 3. 
ix
The plan won’t ‘create’ 100,000 jobs as O’Farrell claims, it will just generate waste and red tape.
Imagine Business ‘A’ hires a new worker from Business ‘B’ and pockets $4000 from Barry
O’Farrell’s plan. No jobs have been created; but $4000 has been wasted. If Business ‘B’ hires a
replacement worker straight away it won’t qualify for $4000, because under the plan the position
must be above the highest number of employees at the company over the last 12 months. So rather
than hire a replacement worker straight away, Barry O’Farrell’s plan will encourage Business ‘B’ to
wait for one year, then pocket $4000 when it hires a worker out of Business ‘C’. After two years, no
jobs have been created; but $8000 has been wasted. 
x
NSW Liberals & Nationals, Jobs Action Plan, Policy Document, page 2. 
xi
Australian Bureau of Statistics, 6202.0 - Labour Force, Australia, Jan 2011. 
xii
Gross State Product of NSW in 2009-10 was $407 billion (Australian Bureau of Statistics).  

Bazzanomics Research Paper | NSW Labor | February 2011 7