Next week’s NSW state Budget is shaping up as a real test of the political and economic skills of both major parties. With the focus on Sydney’s rail and water infrastructure issues, a turnaround in the Carr Government’s focus over recent months has gone unnoticed. The latest Newspoll has Carr ahead at 51% to 49% in two party preferred terms and the Morgan poll has Labor leading 54 to 46. Voters are unsure about him – his personal approval ratings are slumped in the mid thirties – yet Carr continues to maintain a strong lead as preferred premier.

The government is expected to announce an extra $1 billion in health funding and provide additional support for disability services in the Budget. They also have committed to undoing last year’s disastrous land tax changes and are expected to scrap the vendor tax. The government has also flagged a massive infrastructure spend, including extra prisons for 1,000 extra prisoners, a desalination plant, and more funding on roads and energy.

Spending increases and tax cuts don’t go hand in hand, so Carr is expected to abolish the unattached list of public servants who are employed but have no roles, scrap its policy of no forced redundancies and require across-the-board cuts in bureaucracies other than health, education and the police. Liberal leader John Brogden called on the government to sack 18,000 public servants last Sunday to an overwhelming silence, although key minister Michael Costa has already floated the idea of sacking 35,000 pen pushers. Insiders say more than 18,000 public servants could go – but that the blame will be pinned on the federal government and the $3 billion NSW GST shortfall.

Brogden’s pre-budget positioning follows extensive Liberal Party polling that suggests the Liberal leader is seen as a carper who fails the leadership test because of an unwillingness to take the unpopular side of arguments. That’s bad news for Brogden, given the accusations from the right of his own party that he has no real philosophical core. To counter this, Brogden is expected to announce a total of $3 billion in spending cuts and the tax cuts this would provide.

Brogden – like Beazley – will put his plan to parliament, it will get knocked back and he will not take the plan to the next election. This is a move designed to secure his base. In reality, the Liberals have already made around $2 billion in promises and Labor will introduce many of the cuts he is expected to propose.

Brogden got a good run with his public service cuts and is expected to go in hard with his expenditure savings. He might even do the old budget trick of doing it over four years and turn the figure into something more like $10 billion plus. But if he follows this path the cuts will still be topical at the next election – unlikely, given some of his spending commitments in the 2003 poll.

Labor sceptics say they are keen to see how Brogden’s numbers stack up, given the policy advisers to press secs ratio in his office. It’s high stakes for both sides. Carr has the ducks lined up pretty well – but how will Brogden respond?