$58b splurge to hit surplus Brian Robins June 2, 2008 THE State Government has flagged a surge in borrowings to fund a $58 billion infrastructure spending splurge over the next four years. Infrastructure spending will rise 11 per cent to a record $13.9 billion in 2008-09 alone. The foreshadowed spending, to be outlined in the state budget tomorrow, will increase borrowing by $21 billion between now and 2012-13, although this figure could be reduced if the Government succeeds in selling the state-owned electricity industry, now being debated in Parliament. The heavy infrastructure spending program, coupled with pressures on government revenues from the weak property market and the downturn in financial markets, will make it difficult for the Government to keep the budget in surplus following recent rises in interest rates and pressure for public servant wage rises. In last year's budget, the Government slashed its forward annual budget surplus estimate to around $500 million a year from around $1 billion a year achieved in the previous three budgets. The pressures on tax revenues will squeeze the outlook further. The Treasurer, Michael Costa, has already flagged that the state will miss a number of legislative targets under the Fiscal Responsibility Act because of the big infrastructure spending program now under way, due to the "structural imbalance" faced by all state governments from an ageing population that is increasing demand for services, and only limited access to higher tax revenues. A large part of the projected increase in infrastructure spending is the $12 billion North West Metro. It is unclear whether funding for the flagged West Metro to Parramatta, to cost as much as $10 billion, is included in forward spending estimates. The Government will also spend heavily on electricity; $3.5 billion is earmarked for transmission upgrades over the next four years. Upgrading water will account for a further $2.2 billion, and $400 million on ports. Port Botany is in the midst of a $1 billion expansion, and preliminary work is under way on a$100 million upgrade of Port Kembla, which is receiving most of the port capacity being shifted out of Sydney's Port Jackson. The lion's share of the heavy infrastructure spending program will be absorbed by the rail network - a forecast $3.7 billion over the next four years, a threefold increase. This will be spent on the metro and the Clearways project, which is aimed at reducing congestion on the network, coupled with the south-west rail link and new rolling stock. In last year's budget, infrastructure spending reached a record $12.5 billion, up 29 per cent, pushing the rolling four-year total until 2011-12 to $49.6 billion. At that time, the Government forecast a steady decline in outlays for the three years following the surge in 2007-08, which it has since reversed. Instead it is now forecasting rising outlays in the next few years, following on from the 11 per cent rise tomorrow's budget papers will disclose to $13.9 billion just for the 2008-09 financial year. COSTA'S CASH *Roads Pacific Highway to receive extra $166 million. *Education $267 million on schools, plus 19 school and 12 TAFE projects costing $246 million. *Housing new public housing, community housing and crisis accommodation costing $201 million. *Hospitals extra $46.4 million for baby boom, including more midwives. *Health extra $10 million for blood and marrow transplants. Credit rating agencies last year warned the State Government it was getting close to its limit of debt for infrastructure funding. To keep its financial management credentials intact will require Mr Costa to reveal significant inroads into general government expenses - at a time when the Government faces significant pressure over demands for public sector wage rises above the 2.5 per cent cap. He will also be expected to deliver a Budget surplus of around $500 million. The big-ticket items expected to be revealed in the Budget include the funding timetable for the $12 billion North West Metro and 19 new school and 12 new TAFE projects worth $246 million. The Daily Telegraph can reveal that $65 million will be allocated for the extension of the M5 East filtration trial plant and $150 million on the Victoria Rd upgrade. Riverstone police station and Lake Macquarie region will be expanded at a cost of $35 million.