Analysis of the State Budget 2008-09

Once again, sustained economic and jobs growth has underpinned strong growth in revenue to the State Budget and delivered significant budget surpluses.

Politically this strengthens the State Governments economic credentials. It has also given the State Government much greater flexibility to increase expenditure in key areas including the centrepiece of the Budget -the $1.4
billion public transport modernisation program. This is a very welcome initiative and a good xample of a project that can demonstrate economic, environmental and social benefits.

The State Government has broken with the previous government's refusal to use its capacity to borrow cheaply to renew our ageing infrastructure. Governments, as with sound businesses, need to lay the foundations for future prosperity. A modest public sector borrowings program is helping to underpin the new rail system. While the program could have been more ambitious, it is heading in the right direction.

There is a risk that the projected budget surpluses could be eroded somewhat over coming months by higher than expected wage outcomes from enterprise bargaining agreements with public servants. This shouldn't be cause for alarm if a reasonable deal is struck. To ensure that the public sector remains an attractive place to work the State Government will need to consider annual wage increases in excess of the 3-3.5%.