Surging property prices and New South Wales’ decision to keep the state open as much as possible during the Covid pandemic will deliver a more rapid return to the black for the state, prompting the treasurer, Dominic Perrottet, to declare NSW “dressed for success”.
Stronger than expected stamp duty returns thanks to the booming property market and higher payroll tax receipts will see NSW achieve a $466m surplus in 2024-25, much quicker than expected, the state budget predicts.
Perrottet revealed the much faster turnaround in the state’s fortunes on Tuesday.
“NSW is back,” he said in his budget speech. “From the deepest recession in our lifetime we are back to growth and back on track.”
The recovery was “no accident”, he said.
The Coalition government had built the “best public health system in the country”, “pioneered digital delivery” and “taken control of the budget”.
“Our pandemic response and the decade that enabled it is the fruit of our values. We believe in the people of this state – in letting them thrive and getting government out of the way.”
The deficits in the interim are also smaller. This year’s 2020-21 deficit has reduced from $16bn forecast to $7.9bn. The deficit will grow again in the coming 2021-22 financial year to $8.6bn, in part because of a decision to increase public servant wages and drop an earlier policy to restrict wage rises to 1.5%.
Meanwhile, the budget reveals NSW has spent over $4bn since March 2020 on its Covid response.
Perrottet has become one of the big-spending treasurers, with expenditure up 8.2% in 2020-21 and 7.2% in 2021-22.
Perrottet was unapologetic. “This is a budget with heart,” he said, adding that the Berejiklian government had made a conscious decision to keep investing in the state.
But the budget also reveals that the stimulus will be wound back in future years and that cuts are coming – possibly in the lead-up to the next state election.
The government is counting on NSW being opened up to the rest of the world by mid next year, with Perrottet revealing the closed border is costing the state $300m a month.
The state’s economy (gross state product) is now on track to surpass its pre-Covid size in 2022.
Unemployment is back at 5% and is expected to to fall to 4.5% by 2024, which Treasury considers full employment.
The additional spending in the budget was relatively modest after the spending spree during the early months of the pandemic. Much had been pre-announced.
For families, the government will continue to fund two days for free preschool until the end of 2022. It will also provide $100 vouchers to pay for swimming lessons for kids between the age of three to six.
In what the treasurer said was a leading move, the NSW government will provide five days of bereavement leave to women who suffer a miscarriage and additional leave when a baby is born prematurely.
Faced with Labor and its new leader, Chris Minns, trying to reposition its attack on the cost of living, Perrottet was at pains to point out the subsidies already available from the Berejiklian government.
In the days leading up to the budget, it announced a second voucher scheme, Thank God it’s Friday, to try and stimulate spending in Sydney’s CBD, which has remained quiet in the wake of Covid.
A further $1bn will be spent this financial year on the health response to Covid, including including $261.3m on vaccine distribution, $340m for PPE, $200m for pop-up clinics and $145.4m on quarantine of returning travellers.
Perrottet noted that NSW had quarantined close to half of the returned travellers to Australia.
One big-ticket item, at $2.7bn, was the decision to lift the policy of capping public services wages at 1.5%. The measure, introduced during the pandemic, was causing the government political grief, particularly as it applied to nurses, police and paramedics who have been on the frontline of the pandemic response. It had also been blocked in the upper house. Instead, public servant wage rises will return to the old (legislated) cap of 2.5%.
There was also $214m over four years for the ambulance service for a new state operations centre, jet aircraft and retraining paramedics for intensive care.
A further $70m will go to boosting hospital security, after a number of incidents at state hospitals. The government is yet to announce its response to the ice inquiry, which will likely see further measures.
An additional $719m will go to complete the upgrade of communications networks for first responders, and $268m for the response to the bushfire inquiry.
There was also $500m over for the digital restart fund, which has powered NSW’s uptake of digital service delivery and contact tracing, allowing the state to decide against hard lockdowns.
In terms of climate change response, the NSW government has already announced a $490m package to encourage the uptake of electric cars.
Stamp duty will be waived on vehicles under $78,000 (from 1 September). $3,000 rebates will also be offered on the first 25,000 vehicles purchased with a value under $68,750. There are also funds for new charging stations and to convert the state’s fleet of cars.
Unlike Victoria, NSW does not intend to introduce a road user charge until there is 30% uptake of electric cars.
Perrottet acknowledged that surging property prices were not good for young people trying to enter the property market.
He said the budget included a new infrastructure payment by developers to help pay for more infrastructure, but acknowledged this was “the challenge of our generation” for both state and federal governments.
The NSW Labor opposition said the budget showed the treasurer was relying on the housing boom and ordinary people.
“This budget picks the pockets of families in NSW,” the Laobr leader, Chris Minns, said. “Taxes are high, tolls are up, fines are high.”
Minns said the budget revealed revenue from government-owned toll roads, such as the harbour bridge, was up 8%, but he agreed this was partly due to increased usage. Revenue from fines was up 35% because, Minns said, the government no longer announces the presence of speed cameras.
The shadow treasurer, Daniel Mookhey, said Perrottet had “ latched onto the property boom” to repair his budget but had done nothing to tackle housing affordability.
Union leaders were lukewarm about the return to a 2.5% wages cap for the public sector, saying there were other pressing problems, notably staffing levels in hospitals and a shortage of teachers.