How Far Will the Libs Back Newcastle?

The dramatic Liberal –National Party victory in the recent state elections has overturned a long standing political order in the city of Newcastle and the Lower Hunter.  With a property investment hat on, what is the likelihood that the coalition will throw money at the area to preserve its incumbency?

The first issue is how much coin do they have in the war chest?  They’ve inherited a state with a wonky economy and not much ready cash.  Barry O’Farrell is making all the right noises, (as pollies often do) and has created the Hunter Infrastructure and Investment Fund.  The $350 million commitment is small compared with the $8 billion of investment already completed or underway and the $8 billion of proposed investment.  At least there is intention stated here and Barry O’Farrell is on the record as saying that Newcastle deserves a “fair share” of state expenditure to support the investment being made in the area and the jobs that it creates.

Newcastle has rejected its long term Labor Party ties but the Libs probably have to work pretty hard to hold their seats like Newcastle, Swansea and Charlestown.  If they make this a priority, they will have to take action early in this term to be able to show progress before the next election.

We’ll be watching the news on this topic and update you in the weekly reports if there are important developments.  More big picture investment in Newcastle will be cream on the cake for what is already probably NSW’s most appealing residential property investment destination.

Here’s a summary of the relevant seats in the Newcastle-Hunter region and the members elected at the March 2011 state elections;

Newcastle – Tim Owen (Liberal) replacing Jodi McKay (Labour)

Swansea – Garry Edwards (Liberal) replacing Robert Coombs (Labor)

Lake Macquarie – Greg Piper (Independent) holding the seat he won from Jeff Hunter (Labor) in 2007

Charlestown – Andrew Cornwell (Liberal) replacing Matt Morris (Labor)

Maitland – Robyn Parker (Liberal) relacing Frank Terezini (Labor)

Wallsend – Sonia Hornery (Labor) held the seat she won in 2007.

Cessnock – Clayton Barr – new member holding the seat for Labor

Port Stephens – Craig Baumann (Liberal) held the seat he won from John Bartlett (Labor) in 2007

Upper Hunter – George Souris (National Party) has been the sitting member since 1988

Of these seats, Wallsend and Charlestown have never been held by anyone other than the Labor Party whilst Cessnock has had one term of 3 years as a Liberal seat since 1913.  Newcastle and Swansea have always been represented by the Labor Party or independents.  Lake Macquarie and Port Stephens have retained their first non-Labor members who were both elected in 2007.  Maitland is a swinging seat and the Upper Hunter was briefly held by Labor in 1910 but otherwise has been a conservative electorate.

Clearly the most recent election has recognised a quantum shift in some long standing allegiances.  So how does the conservative government perceive its new status, given that some seats such as Newcastle only require a small swing to restore Labor?  

A more than reasonable case can be made that a long term shift in the core politics of the Lower Hunter started several years ago.  The shift in Wallsend and Charlestown is important, but a signpost to the bigger picture is the election of independents in the seats of Lake Macquarie and Port Stephens in 2007.  Given Sydney’s prominence as a financial centre, it is unlikely that an overall change in the balance of wealth with Newcastle will take place, but there is no doubt that the region is closing the gap in “average” wealth.

Massive industrial development is one factor, but the sea change movement with more retirees heading to lifestyle locations around Lake Macquarie and Port Stephens has clearly been another.  Anyone who has driven along the city beaches at Newcastle will have recognised the money being spent in the city and even Nathan Tinkler’s reported $13 million development of a double block at Dixon Park Beach is a lead at the top end of the market.

Some other factors should be borne in mind.  In the seat of Newcastle, the Labor party dropped its sitting member Bruce Gaudry in 2007 in favour of Jodi Mackay.  Gaudry ran as an independent, as did the former Lord Mayor Newcastle John Tate, which trimmed the previous Labor margin of 15% to 1.4%.  This points to a shift in demographics as well as sentiment turning anti-Labor.  In Swansea, it clearly didn’t help that the sitting Labour member Milton Orkopoulos was sentenced to 13 years jail in May 2008 for child sex offences and the supply of drugs.

It stands to reason that a conservative government will look to support a political shift created largely by an influx of wealth.  One of the obstacles to effectively supporting the region is the lack of resources available to the government.  Raising taxes is an obvious way of creating a bigger pool but this is generally electorally unpopular and may turn new swinging voters back to Labor.

The conservative parties’ electoral strategy will be a factor in determining how significant their expenditure ends up being.  A good read on this will come from how they get moving with investment early in their term as to be able to show benefits over a Legislative Assembly term and be re-elected they need to start now. 

Barry O’Farrell’s choice of the Hunter as the location to announce his “vision” for NSW in late 2010 showed evidence of an understanding of the region’s significance to the success of his campaign.  O’Farrell’s “100 Day Plan” identified the 5 key, if predictable issues of economic rebuilding, community services, infrastructure, government accountability and the environment.  He has also announced the creation of the Hunter Infrastructure and Investment Fund.

With a commitment of $350 million the Hunter IIF is not that big, but the state’s relatively parlous financial position means that it doesn’t have all that much dough to spend.  How visible the application of this funding is will be important.  A well worn and time honoured political practice is to make broad commitments that are sketchy on detail with specifics to be filled in later.  At this point in time the Hunter IIF sits in this category, but to be fair, it is far too early to tell whether it will remain there.

The intention for The Hunter Infrastructure & Investment Fund is to

• Have a mandate to invest in Hunter infrastructure projects including transport, health, and water infrastructure;
• Be over sighted by an independent board comprising people drawn from the local community to ensure the fund is spent on local priorities; and,
• Will help develop a 20-year Infrastructure Plan for the region to guide submissions to Infrastructure NSW and Infrastructure Australia.

The HIIF can be funded by cancelling the proposed Tillegra Dam.

Minister for the Hunter Michael Gallaher has identified that the Hunter accounts for 32% of NSW exports, so on that basis alone should attract support, even if it only represents about 8-10% of the state’s population.   "I recognise the jobs and investment the Hunter region brings to NSW and believe it deserves its fair share of investment from state government in return," Mr O'Farrell said when announcing the HIIF.

By comparison, how much funding will be applied to western Sydney given its approximately equivalent long term Labor sympathy?  The transport corridors of the south west and north west have attracted much attention and the commitment to these projects is far greater than the HIIF.  However, Barry O’Farrell has opened his mouth and on the basis of his “100 day” point of government accountability, is exposed if he fails to follow through.

Politicians of all colours are of course, prone to overpromise and under deliver.  A positive for Newcastle and the Lower Hunter is that Barry O’Farrell is at least making all the right noises – if he wasn’t, then there would be little prospect for delivery.  Other indications of good faith are his inclusion of Robyn Parker (Minister for Environment and Heritage) and George Souris (Minister for Hospitality) in his cabinet.  The Minister for the Hunter (and Police) Michael Gallacher is actually an upper house member from the Central Coast but apparently well acquainted with his northern neighbours.

Is it spin or substance?  Only time will tell, however the new government’s stated intention is clear and on balance of probability is likely to be beneficial for Newcastle and by extension, property investment in the Lower Hunter.  The city is already one of the hottest investment spots on our continent, so any practical steps taken over the next few months will be fuel on the bonfire.