Rees mulls tax hikes, axing rail link

(AAP) NSW Premier Nathan Rees has been warned against raising business taxes and ditching a massive rail project as he grapples with a projected $1 billion deficit.

Mr Rees said he was "pulling back" from Sydney's $12 billion North-West Metro Rail
Link, and refused to rule out tax increases, prompting a strong response from the
state's business community.
"With the NSW economy contracting, now is not the time to hit employers with higher
taxes to fund shortfalls in the budget," NSW Business Chamber CEO Kevin MacDonald
said in a statement.
The last state budget included a cut in payroll tax from six per cent to 5.75 per
cent from January 1, with further gradual reductions to 5.5 per cent by January
2011.
The cost of this reduction was estimated at $1.9 billion over four years.
But when the cuts were announced, a $268 million surplus was projected for this
financial year, and NSW is now on the verge of losing its Triple A credit rating,
with falling revenues and massive budget blow-outs.
Since assuming the top job on Friday, Mr Rees has sent mixed messages about his
intentions regarding tax hikes.
On Monday, he said the government had previously ruled out tax increases, and
"always tried to bring downward pressure to bear on the various types of taxes and
that's not going to change".
But on Tuesday, he would only say his "inclination was not to increase taxes",
before adding that "nothing is being ruled in or out".
The Sydney Chamber of Commerce added to the pressure, saying the government must
push ahead with the North West Metro rail link to cater for projected population
growth.
"No-one has ever claimed that a sustainable transport network is cheap but we must
invest to reap the rewards," chamber executive director Patricia Forsythe said.
Opposition transport spokeswoman Gladys Berejiklian also said the rail link should
proceed.
"No doubt commuters are just shaking their heads and saying 'more of the same'," she
told reporters.
Mr Rees said he was committed to the project up until the full extent of the state's
financial problems was revealed.
"I stood up at a local government fundraiser last week ... and I said 'look the
North-West Rail Link wasn't dependent on the energy sale and will proceed'," he
said.
"That was before we realised what treasury was saying, which is over a course of a
year you've got a billion-dollar shortfall."
He earlier told Fairfax Radio Network: "I am pulling back from it."
But he went on to nominate public transport as a top priority.
"My view is that there is no more important public service to deliver at the present
and nowhere where we've got more credibility to regain than in public transport."
He reiterated his commitment to maintaining the state's AAA credit rating, saying a
downgrade would mean $500 million in additional interest payments annually.
That money was better spent on hospitals, schools and public transport, he said.
When asked how the state's finances had fallen into such a state within a matter of
months, he would not provide details.
"I don't have the time, nor the inclination to examine why we've got those estimates
wrong," Mr Rees said.
"I don't have the luxury of examining how that occurred."
Mr Rees said the anticipated mini-budget would be delivered in nine weeks' time,
with a fiscal framework to address the monthly revenue shortfall of $90 million.