There’s something in the water in Macquarie Street and it’s not COVID-19.
Well, it might be COVID-19 soon enough the way the virus is running, but for now it seems to be a mental rather than respiratory infection.
Take your pick: The NSW government is suffering an outbreak of gross incompetence or has simply lost the plot, parting ways with reality as most of us know it. Or both.
From COVID management to finance, the hitherto relatively successful government has suddenly gone more than a little bananas.
The Premier keeps putting on a daily media show where she paints pandemic pictures everyone knows are fake.
Meanwhile the Treasurer, fresh from his unmitigated icare workers’ compensation scheme disaster, is borrowing at least $10 billion with which to play the financial markets in a game with “disaster in the making” written all over it, never mind copious conflicts of interest.
The daily Glad performance slipped from reality weeks ago.
Just as anyone vaguely literate and numerate knew well before it was announced that Greater Sydney was going to be locked down for August, everyone now knows the length of the lockdown is indeterminate but lengthy – well out beyond the August 28 date Ms Berejiklian still thinks means something.
The troops will be home for Christmas.
It is a mystery why the Premier continues to offer vague false hopes about easing the lockdown – for example, pretending that a vaccination rate of 50 per cent of those over 16 would make a big difference.
It is not the stuff of competent government. It undermines confidence in whatever she has to say.
That the Health Minister Brad Hazzard wouldn’t let his chief medical officer say when she first advised a lockdown was necessary also doesn’t help.
Again, it’s a nice thing to have confidence in the leadership team when there’s a crisis.
Back in those rosy days of “gold standard” hubris, the confidence was there. Now, when the government declines to be straight with us as the crisis worsens, that confidence is fading like Scott Morrison’s approval rating.
In such circumstances, one might think the person often suggested as a potential challenger for Ms Berejiklian’s job, Treasurer Dominic Perrottet, would be treading carefully, waiting for the tide to turn his way and people to forget about icare.
But no. Instead, he’s taking NSW off to the casino, thinking he can make a killing with the help of a bunch of former dealers at said casino, borrowing at least $10 billion and perhaps as much as $15 billion to play.
The Australian Financial Review’s John Kehoe started this week with a fine scoop on what Mr Perrottet was up to, “an under-the-radar budget strategy that public finance and credit analysts warn will put taxpayer money at risk”.
“Market participants believe the innovative financial structuring under state Treasurer Dominic Perrottet is unprecedented in Australia, and rare among governments in the world, because it involves the use of debt to effectively underwrite inflows into the NSW Generations Fund,” Mr Kehoe reported.
The AFR’s acerbic Rear Window columnist Joe Aston added spice to the story on Wednesday, running through the CVs of the key refugees from the private sector involved in the Perrottet play, suggesting the NSW Treasury Corporation (TCorp) is running rings around the Treasurer.
“TCorp’s fantasy outcome is to build itself a massive, debt-funded pile of financial assets it can charge the government fat fees for managing,” opined Aston. “Clearly, TCorp’s fantasy is being indulged to the fullest extent.”
Treasury claims it isn’t borrowing the extra $15 billion to gear up its spin of the wheel on everything from humble local shares to hedge funds and emerging markets’ debt. The claim is laughable.
By hoovering up money from every other nook and cranny, the fund-of-funds has already forced the government to borrow an extra $10 billion to make up for what has gone into casino chips.
Three things in particular strike me about Mr Perrottet’s cunning plan.
The first is the lack of corporate memory about governments thinking they can beat the markets.
Maybe he’s never heard of the $2.1 billion Peter Costello lost as federal Treasurer playing the foreign exchange casino earlier this century.
Closer to his home, there was the disastrous NSW government HomeFund. It wasn’t so much a disaster for the government as for the 57,000 low-income borrowers locked into long-term fixed-rate loans of between 12 and 15.8 per cent when rates were about to start their long decline.
Some 2700 people lost their homes and were still paying interest when the NSW government finally wrote off the balance.
Secondly, if a government was feeling lucky and wanted a punt, the trend isn’t to flash around the cash on all the fees of funds managers who claim they can beat the market – and mostly can’t. Index funds are at least cheap.
But thirdly and most importantly, the strategy opens the way for massive conflicts of interest, starting but not finishing with the TCorp board that is stuffed with people from entities that will compete with TCorp and try to sell it stuff.
More directly, the fees for investment banks and others are always a rich field when close to government. It’s not just supping with property developers that requires a long spoon.
And then there is the latent conflict – once the public sector acquires an asset, what decisions might it take to favour that asset?
Just the lack of transparency in how this game has come to light does not build confidence in it.
Ah yes, that confidence thing again.