“Be like NSW.”
That’s the concise version of RBA governor Philip Lowe’s message to the federal government this week, after the Reserve Bank cut interest rates to an historic low of 1 per cent.
Lower interest rates will give our economy another boost, and will be warmly welcomed by home owners, first-home buyers, and businesses looking to invest.
But Dr Lowe’s clear message was that monetary policy alone is not enough to drive economic growth, pointing to two additional policy levers governments can pull: infrastructure investment and structural reform to help businesses expand, invest, innovate and employ more people.
On both counts, NSW is already well ahead of the game, as our budget showed just a few weeks ago.
When it comes to infrastructure, NSW is indisputably in the box seat.
Because we got the infrastructure ball rolling when conditions were more favourable, our pipeline of projects is already firmly in place – now we are just getting on with building it.
The recent budget locks in another record $93 billion program of schools, hospitals, roads, rail, water infrastructure, museums, stadiums and everything in between.
That is on top of the $130 billion we have already invested in infrastructure projects since 2011.
The infrastructure we are building is important for our economy in both the short term and the long term.
It has been estimated that our $93 billion pipeline will support more than 100,000 jobs over the next four years.
And it represents the lion’s share of our government’s public investment that is projected to contribute about half a percentage point to NSW’s economic growth this year and in each of the next two years.
In the long term, it will increase productivity by reducing congestion and cutting travel time, and it will carve out rich new veins of economic opportunity where businesses can set down roots and grow, and people can find fulfilling work closer to home.
Of course, without the asset recycling plan our government implemented, there is no way NSW would be building on the economy-boosting scale it is, and our people would be the worse for it.
Because we acted with foresight years ago, we are in a position to invest in infrastructure at the time our economy needs it most, as Dr Lowe’s comments last week make clear.
The second policy front on which the Reserve Bank governor encouraged governments to boldly advance is structural reform to help businesses expand, invest, innovate and employ more people.
This year’s NSW budget included the next wave of payroll tax cuts designed to do exactly that.
Once again, this is not a program we are scrambling to start now, as the economic headwinds pick up – it’s a program that is already well underway.
It’s yet another example of how our government’s forward thinking means NSW is not being caught flat-footed and merely reacting to the economic news of the day – we are ahead of the curve, and the people of NSW are in a stronger position as a result.
But we’re not stopping there.
Our budget also launched a new wave of long-term economic and fiscal reforms to keep up the momentum.
We are taking steps to more closely link expenditure to better outcomes, putting the citizens we represent squarely at the centre of budgeting decisions, rather than simply ploughing more money into government programs with too little regard for the results.
One example is making sure our record investment in education is directed at improving the education outcomes for school students, because unless that is happening, the funding is meaningless.
We are also taking firm steps to fix federal funding arrangements so states like NSW are more self-reliant, more autonomous, and are rewarded, not penalised, for making their economies stronger.
Esteemed business leader David Thodey will lead a comprehensive review of federal financial relations from a NSW perspective, representing the first major effort by any Australian government to realise the economic benefits of reform in this space that the Commonwealth Productivity Commission identified in its Shifting the Dial report, which is now two years old.
This is an area where NSW is well placed to take the lead, reinvigorating the conversation about how our federal system can be improved for the benefit of the people of NSW – and indeed the nation.
However for federal reform to be successful, we will need the co-operation and collaboration of our federal counterparts.
On this front, along with infrastructure investment and structural reform, the message to the federal government is simple: be like NSW.