On September 9 last year after the newly-chosen NSW Premier Nathan Rees took his Cabinet to Government House to be sworn in, The Sydney Morning Herald carried a front-page banner headline which read: “Here’s my A-team, says Rees … shame about our AAA rating.”

An accompanying editorial referred to the appointment of Eric Roozendal, “a dogged spear-carrier for the Right”, as Treasurer and said:

“His first task will be to compile a mini-budget to patch up the state’s finances after the failure of power privatization so that NSW can keep its AAA credit rating.”

Now roll forward to this week. Thursday’s editorial, headlined “Myth of the triple-A rating”, said:

NSW’s credit risk is rated by two agencies, Standard & Poor’s and Moody’s Investor Service, which charge the state for the service. You have to wonder if we are getting value for money when you consider these agencies’ contribution to the global economic crisis.

They rated many investment products containing subprime mortgages as tripe-A, thereby boosting the growth of the subprime market and the scale of the subsequent collapse.

The editorial went on to argue that “the obsession with the rating is unwarranted and unhealthy” and that “even if (the NSW credit rating) were to drop a level or two, the increase in the state’s interest repayments would be, in the context of the budget, miniscule.”

What a change from the years when the Herald, its economic writers and public intellectuals, hailed Premier Bob Carr and Treasurer Michael Egan who turned budget surpluses into a Cargo Cult as the state’s public services fell into decline and disrepair.

The government had a retinue to media twerps who ran around the Press Gallery promoting the an-ly-fixated obsession with the triple A rating.

They were less vocal when it was revealed last year that NSW councils had lost hundreds of millions of dollars of ratepayers’ money as a result of purchasing collaterised debt obligations (CDOs) which had been given generous — but ultimately misguided — ratings by US-based credit agencies.

A report by Michael Cole made eight recommendations to tighten local government investment practices. His report to then Treasurer Michael Costa neatly sidestepped any criticism of the NSW Treasury and heaped the blame on the inexperience of councils and credit agencies which were “slow to react” to the subprime crisis.

Cole recommended that councils be instructed to make all new investments until the end of 2009 with TCorp, the Treasury’s investment agency.

In a conflict of interest statement at the conclusion of his report, Cole declared that he was chairman of IMB Limited, chairman of Platinum Asset Management Ltd, director of Ascalon Capital Management and a member of the board of TCorp itself.

The Herald’s commendable decision to oppose credit agency spivvery and support budget deficits when needed should be embraced by Rees and Coalition leader Barry O’Farrell. Governments are elected to govern and provide public services funded by taxpayer revenue, investments and borrowing, not to keep the books in surplus for the benefit of Wall Street.