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Monday, 6 April 2015

Opinion piece - Labor’s East West threat to sovereign risk - Herald Sun - 7 April 2015

Labor’s East West threat to sovereign risk

WHILE he tried to sugar-coat it, former Labor minister Theo Theophanous sent as clear a message as he could to the Andrews Government on the East West Link on this page recently.

It wasn’t a complicated decode.

Of course, it began with an obligatory political attack on the state Opposition, but critically it focused a floodlight on the folly of both options the Andrews Government is considering to kill off the East West Link.

It highlighted the sheer waste involved in paying out hundreds of millions of dollars in compensation not to build the link.

It warned of the monumental risk to Victoria’s financial reputation, credit rating and therefore interest costs on future borrowings of any decision to legislate away compensation.

And it reiterated a statement of the self-evident — there is no alternative good-to-go, shovel-ready infrastructure project like East West.

In other words, Dan Andrews just should build the Link.

While Theophanous didn’t actually say this, it’s pretty clear he thinks it. It is a plea the Premier should listen to and act upon. The consequences of not building East West are stark.

The public will rightly be appalled if Labor writes a fat cheque not to build the much-needed road.

Residents in the outer east and Yarra Valley will endure ever-increasing travel times, and businesses will experience increasing costs to deliver goods and services.

It will limit economic growth, stifle opportunity and cost jobs.

Alternatively, if Andrews legislates to junk the contract it will have all these costly consequences — and more.

Such a reckless act would reverberate around the financial world, sullying Victoria’s reputation as a safe and stable place to invest.

It would send the message that investing here and signing contracts with our State Government is risky business — something that pre-Andrews was unthinkable.

This Andrews risk premium as a result of increased sovereign risk has the potential to impact on Victoria’s credit rating.

Any such credit rating downgrade would naturally result in an increase in the rate of interest our state is charged for future borrowings; jacking up the cost of both debt and future projects.

Imagine how Victoria would go arranging international finance for its next big infrastructure project? Something like this, I reckon: “Hi, I’m Dan from Victoria and I’m the guy who tore up the last contract.”

The consequences are so far-reaching for financial reputation and confidence that no Labor leader in living memory has gone where Andrews threatens to go.

That’s why incoming governments honour contracts.

Last year, federal shadow treasurer Chris Bowen outlined federal Labor’s approach in black and white: “Bill Shorten and I are of one mind, Labor honours contracts, Labor in government honours contracts entered into by previous governments.

“Even if we don’t like them for issues of sovereign risk Labor honours contracts in office signed by previous governments.”

As a fellow Victorian, Bill Shorten should defend his position.

To date he has stood mute as state Labor contemplates its financial vandalism.

Bill Shorten knows the Link should be built. In 2007, before he entered Parliament, he co-authored a submission on behalf of the AWU to the Eddington Review advocating an end to the Eastern Freeway roadblock, stating:

“The Eastern Freeway is the remaining freeway to terminate in the inner suburbs without providing the connectivity benefits of other freeways to city and regional users and commuters.”

Now, as federal leader he is apparently happy to sit by and ignore his own words as well as the commuters and businesses of the outer east and Yarra Valley.

In Dan Andrews’ case, I can’t be sure whether he is fully aware of the consequences of what he is contemplating.

But in Bill Shorten’s case, I am sure he knows enough to know.

That is precisely why he should stand up to Andrews, and for Victoria. Even at a minute to midnight common sense and financial sanity can prevail.

If Dan Andrews stops, pauses, steps back and just builds the Link, he will have displayed the character to not let stubbornness condemn millions of Victorians to a traffic calamity and the entire state to needless financial harm for years to come.


Herald Sun, 7 April 2015

Link: http://www.heraldsun.com.au/news/opinion/labors-east-west-threat-to-sovereign-risk/story-fni0ffsx-1227293444026

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