The New South Wales (NSW) Government has delivered an expansionary budget which increases the fiscal deficit for the coming financial year, according to Australia’s leading professional accounting body, CPA Australia.
General Manager External Affairs Dr Jane Rennie said, “The budget includes a significant “grab bag” of stimulatory measures which will touch all corners of the state’s economy.
“The NSW economy is doing better than expected but the government’s not looking to recoup its pandemic spend just yet. There are no new taxes or revenue raising measures for businesses or individuals in this budget.”
The fiscal deficit will increase from $7.9 billion in current financial year to $8.6 billion for 2021-22. Many of the budget initiatives were previously announced in 2020 as COVID stimulus and support measures.
“We think this small increase in the deficit is appropriate at this stage of the state’s economic recovery, in view of ongoing COVID-related uncertainty and impacts and the continued closure of Australia’s borders.”
The budget forecasts net debt of $63.3 billion for 2021-22, which is $12.1 billion lower than expected. This is the result of a healthier than expected economy which has led to higher tax collections and the success of public health measures at preventing a large-scale COVID-19 outbreak.
“With the cost of borrowing so low at present, we don’t consider the size of NSW’s debt concerning. The state won’t experience full economic recovery until the successful national COVID-19 vaccine roll-out and the re-opening Australia’s international borders.”
A major part of the budget spend goes towards infrastructure, with a combination of new and existing projects. Several of these are of sufficient combined scale to have a material impact on the state’s future jobs and investment figures.
$1.15 billion is allocated to construction of the Bradfield City Centre, near the Western Sydney International Airport. Once completed, Bradfield is slated to be around 60 per cent of the size of the Sydney CBD.
“This is a major infrastructure project and will support a small army of workers during the construction phrase. While others are calling time on modern cities, NSW is forging ahead with Australia’s first so-called 22nd century city. It’s blue sky thinking, and time will tell whether it becomes merely pie in the sky.”
An investment of $380 million over four years has been announced for large-scale renewable energy. “The Electricity Infrastructure Roadmap is a commendable example of ‘building back better’. In addition to creating jobs and attracting investment, it positions NSW for a post-coal, low carbon economy.”
The budget commits significant funding to stimulate the visitor economy. This includes the establishment of a $200 million significant event fund which aims to secure global events for Sydney and regional NSW. An additional $240+ million is allocated to capital works for the state’s cultural institutions and blockbuster funding.
“These large-scale cultural projects position NSW for the ‘future state’ when international travellers and students return.”
A $100 “Thank God It’s Friday” voucher initiative aims to attract NSW residents to the CBD on the last day of the working week.
“CBD incentive schemes are becoming de rigueur in budgets as governments seek to revitalise their hollowed-out city centres. Unfortunately, they do little to address structural issues caused by the absence of international tourists and office workers.”
For small businesses, the budget includes a new “Small Business Shorter Payment Terms Policy”. This will require larger businesses who contract with the government to pay their small business subcontractors within 20 days, which will assist their cash flow management. This compliments the Federal Government’s “Payment Times Reporting Scheme”.
Much vaunted stamp duty reform is mentioned only in passing, while the government continues its consultation process. “Replacing stamp duty with an annual property charge will shift the government’s tax base from the real estate market to the land itself. This will provide a more stable revenue base for the government.”