Private Members' Statement

Mr ANOULACK CHANTHIVONG (Macquarie Fields) (21:44): I return with my humble working‑class economist series for 2022 to demonstrate two important economic concepts:

(1) moral hazard, and

(2) opportunity cost.

Moral hazard generally describes a scenario where one party takes on additional—or some would say excessive—risk knowing that another party will bear the economic/financial consequences.

A perfect example, of course, is the global financial crisis, caused by dodgy bankers selling even dodgier financial products to the public, which inevitably led to systemic risks to the financial system, only for governments around the world to bail the banks out.

Another example of moral hazard can be found in procurement contract management by this Coalition Government. How is it that the Government signs a contract to have project X built for an agreed price with a private company or companies, but when market conditions change or when the company misprices its tender or miscalculates its risks, the Government pulls out the taxpayers' credit card and puts a few extra billion dollars on it, on top of the $100‑plus billion already on the State debt?

The Government's attitude is "No problem; anytime. You made a billion‑dollar mistake on your contract estimates or miscalculated your market risk or your cost increases? Poor you. Don't worry about it. Uncle Dom will fix it up and whack it on the public debt for your mistake."

I am not talking about a one‑off budget blowout of $100 or $200.

I am talking about billion‑dollar doozies:

• the $2.2 billion blowout on the City and Southwest Metro;
• $1.7 billion overspent on the CBD Light Rail;
• nearly $3 billion in extra costs on the Metro West;
• the $1.4 billion costs surge on the M6 Stage 1, WestConnex Rozelle Interchange and Sydney Gateway road projects; and
• $1 billion on the new intercity train fleet.

This list is by no means exhaustive. An agreement is signed for a product to be delivered for an agreed price. Just because one party to a contract gets it wrong does not mean the other party picks up the bill. This does not make sense because it just does not make sense.

How can members of the Coalition Government keep a straight face when they claim to be good economic managers? Their repeated mistakes make it clear that the public cannot trust the Government to safeguard public funds from astronomical contract variations.

The Government will blame changing market conditions for cost overruns. That is an issue for the contracted company to manage and to solve.

Why does the taxpayer have to wear the financial consequences for a private company's risk‑taking behaviour when things do not work out or when they have mispriced their tender?

However, private industry cannot be blamed for taking advantage of an ill‑informed and incompetent Government that is unable to manage contracts and procurement processes.

This humble working‑class economist has serious questions for the Government.

Why is the onus not on construction firms to get their original costings correct?

Why has the Government failed to include safeguards in major project contracts to protect taxpayers from cost blowouts?

What oversight will be put in place to ensure that taxpayers do not continue to foot the bill for further budget blowouts?

Why does the Government simply get out the taxpayers' chequebook when construction firms ask for more money?

Contract mismanagement has serious repercussions for the State budget and for local communities everywhere; hence I turn to the second economic concept, opportunity cost.

When the Government oversees budget blowouts, there is less money to fund much‑needed services and infrastructure.

There is a long list of projects and initiatives in my electorate of Macquarie Fields that could have easily been funded by the $10 billion in budget blowouts I referred to earlier, including:

• lifts at Macquarie Fields railway station;
• toll relief for motorists;
• new, upgraded and air‑conditioned schools;
• extra bus services;
• energy rebates for households;
• more nurses and doctors in our hospitals; and
• extra support classes in local schools.

I am sure every Labor MP and Independent MP could easily add to this list.

Members of the Government like to beat their chests and pretend they have a record of strong economic management.

A look at the facts paints a very different and disturbing picture.

Cost blowouts and contract mismanagement hit taxpayers hard.

The opportunity costs for communities everywhere are enormous and growing, in particular for communities in our regions.

New South Wales taxpayers deserve nothing less than money well spent.

Stay tuned, colleagues, for this humble working‑class economist's next analysis of the Coalition Government's mismanagement and failures.