This was a piece that ran earlier today in Crikey. It’s in the free section, so if you prefer to read these things with the green sidebars, please feel free.

Let’s imagine a world where utopia has arrived, where the most complex of problems can be solved by the most simple of actions – where we have change we can… well, you know the spiel.

No, I’m not talking about Barak Obama like everyone else is today, but a world where we flog NSW off to the Kiwis for some nice cheeses and a couple of rugby players.

When we cast our eye across the national economic data, the one thing that really stands out is the absolutely appalling performance of NSW on nearly every metric you care to look at. From retail turnover to building approvals, from unemployment to capital expenditure – NSW is behaving like another country.

To put this in perspective, if we look at those four measures and track not only the NSW performance against the broader Australian performance, but also against the performance of Australia without NSW included in the figures – our hypothetical utopia – the enormity of the economic drag that NSW is inflicting on the wider Australian economy should give us pause for thought.

The usual caveats apply here – we can’t actually disconnect the NSW economy from the national economy, nor would the Kiwis probably want to barter for it to begin with. But the point that the charts really highlight is how strong our economy would actually be if NSW merely became average. Not a powerhouse, but just something approaching barely average.

There are some reasonably good excuses for part of the NSW performance – the nature of their industrial portfolio compared to other states being one, where a number of sectors like finance that are caught in the broader global maelstrom, have a larger than average presence in NSW. The depth and breadth of their housing boom and the resultant hangover it’s created (especially on the consumer demand front, not to mention its sheer opportunity cost) is another issue that needs to be thrown into the mix.

Yet other States, most notably Victoria, have faced similar problems without following NSW into the economic toilet. That begs the question of whether the obvious factors alone can explain the poor performance of NSW, or is the State actually suffering from some broader set of issues that are relatively unique and which aren’t shared by the rest of the country? If that is the case, it also begs two additional questions; what are they, and what can be done about it?

A tired, panicky State government more concerned with rearranging it’s deckchairs than actually growing a pair and pulling their finger out doesn’t help, yet perhaps there is something of a silver lining in that fiasco – the absence of NSW government action may actually be better than the alternative considering their recent history.

We all expect a new stimulus package soon from Rudd – tax cuts, transfer payments, maybe something tailored specifically for the business sector to boot. That’s all good and well – add in a few more rate cuts and the accelerator will be flat to the floor. Yet the size of the drag that NSW is having on the national economy is this great elephant in the room. It’s the relative position of NSW compared to the rest of the country that is creating an enormous problem.

Maybe it’s worth considering a parallel package (or some specific component in any larger stimulus package) that is focused on and tailored to the circumstances of NSW, even if it required the Feds to push around that bunch of hobos currently pretending to run the joint. Especially since any relative increase in the economic performance of NSW would have a significant impact on the broader aggregate position of the national economy – the sheer size of NSW alone guarantees such a thing.

Being a Qld’er, I can’t believe I just said that.

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If anyone has any thoughts on why NSW is performing worse than the rest of the country, I’d be fascinated to hear them. Similarly, if the Federal government is about to launch a new stimulus package, is there anything you think could be done to focus on the predicament of NSW?

Another question – just how big an impact do you think the NSW government’s competency has had on the economic predicament that the State finds itself in?

Elsewhere: Larvatus Prodeo, Core Economics.

UPDATE:

Steve in comments has collected a rather spiffy bag of links to a number of documents on issues that might be related to the NSW predicament.

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