Sunday, September 21, 2008


… as experts condemn his $1b black hole 'beat-up'

Heath Gilmore and Lisa Carty, sun herald

September 21, 2008

MICHAEL COSTA'S $1 billion black hole is a beat-up, two leading academics said yesterday.
Sydney University accounting professor Bob Walker described the outgoing NSW treasurer's infamous press conference - where he revealed the black hole - as a self-indulgent attack on the state's finances.

At the conference Mr Costa gave rise to concerns that NSW must slash spending to retain its triple-A credit rating and tackle a projected $1 billion revenue shortfall.

The new Premier, Nathan Rees, and Treasurer Eric Roozendaal have since promised a November mini-budget to address the revenue shortfall, with major rail projects and other capital expenditure facing the axe.

Professor Walker and his wife, Betty Con Walker, a former NSW Treasury official, said some capital works projects might need to be reprioritised with some economic stimulus but the state's triple-A credit rating was not at risk.

"Costa beat this up because he was sacked and didn't get the [electricity] privatisation through," the Walkers said. "His successors are not necessarily on top of the numbers, and there may be politics involved as well.

"There is no way the public can ascertain whether there is a black hole or not. The Government has withheld the past three financial statements by Treasury despite being required under the Public Finance and Audit Act to publish information on general government receipts and expenditure every month.

"Figures for the 11 months ended May 2008 show a budget surplus of $2.188 million - well ahead of the budgeted figure for the full year of $376 million. No sign of a budget blowout there.

"Alarmist remarks about revenue shortfalls were based supposedly on data for July and August 2008. It would be hazardous to generalise for only one or two months of data, since seasonal factors may be at work."

Professor Walker, former chairman of the council on the cost of government, appointed by the Carr-Egan government, and Ms Con Walker said the fears expressed about the state's triple-A rating were debatable, saying a downgrade from triple-A to double A-plus would increase the interest cost to the state to a modest $14 million, not $500 million, as has been reported.

A spokesman for Mr Roozendaal refused to respond to the claims the budget black hole was fiction and said delaying the release of financial reports was not unusual.