Facing yet another setback to his leadership, NSW Premier Nathan Rees has flatly rejected a leading economic forecaster’s claim the state has spiralled into recession.

In a gloomy report released on Monday, Access Economics’ Business Outlook for December 2008 says Australia’s most populous state is already “drowning” in recession and the rest of the nation is set to follow.

It’s bad news for Mr Rees, who spent last week hosing down rumours of a secret agreement among Labor MPs to replace him with former planning minister Frank Sartor.

The last Newspoll had Mr Rees behind Opposition Leader Barry O’Farrell as preferred premier, and his first four months as premier have been dogged by a heavily criticised mini-budget and the loss of two ministers in embarrassing circumstances.

Mr Rees last week said his job was not under threat, and any talk on the subject by Labor MPs trying to oust him was just “immature bickering”.

Mr Sartor has denied he is gunning for the top job, and while Mr Rees on Monday said he was not distracted by reports of a leadership challenge, he hinted at an imminent cabinet reshuffle.

“Watch this space,” he said, when asked about a potential frontbench overhaul.

In dismissing Access Economics’ appraisal of the economy, Mr Rees maintained it had used “fundamentally different” figures to the Australian Bureau of Statistics and state treasuries.

“In the June quarter, NSW grew by 0.2 per cent, and in the September quarter it grew by 0.6 per cent,” the premier told reporters in Sydney.

“So that’s not in any way aligned with the reports that have come out this morning. I go for the official figures.”

He conceded the recorded growth in the past two quarters was not large.

Mr O’Farrell said the Access report demonstrated NSW families and businesses were paying for Labor’s economic failure over 14 years.

The forecaster’s blunt appraisal should serve as a wake-up call, he added.
“We need to boost investment, we need to provide jobs. The best way to do that is to do something about financing those infrastructure projects cancelled in the mini-budget,” Mr O’Farrell said.

He added Mr Rees must stop worrying about a potential leadership challenge and start fixing the state’s finances.

“This is a dysfunctional Labor Party. It’s led by a man who is unhappy in the job,” Mr O’Farrell said.

“It’s about time they focused on the public’s problem, not their own.”

Federal Opposition Leader Malcolm Turnbull said NSW was “at the centre of Australia’s economic problems”.

“The same political team that have delivered more than a decade of catastrophic economic management to this state, this incompetent Labor state government, they’re the same team that put Mr Rudd where he is as Labor leader,” he told reporters in Sydney.

He urged the federal government to be disciplined in its spending, with a deficit being “a last resort - not an easy way out”.

Federal Treasurer Wayne Swan said all state governments were focused on the economy.

“I think the NSW government, like all governments around the country, will do everything it possibly can to support growth and to support jobs,” Mr Swan said.

AAP