Solid NSW Budget focused on growth – Ai Group comment

“The NSW Government has delivered a solid Budget that is strongly geared towards supporting long-term growth objectives. Modest and ongoing surplus projections and no state debt are rewards for the hard work of structural change combined with innovative approaches to policy and service delivery,” Ai Group NSW Head, Mark Goodsell, said today.

“The budget is framed in an environment not without risks including from a sluggish housing market, continuing drought, subdued wages growth and consumer sentiment. These add up to a state economy that is more reliant on government demand than is sustainable in the longer term.

“The NSW Government is wise to adjust expenditure, particularly its wages bill, in response to falling forecasts for stamp duty and the GST. It makes sense to do this through back office staff numbers rather than lower across-the-board public sector wage caps. This has some dangers including a period of introspection as the public sector is restructured and the potential for unintended consequences. However, it does highlight the need for government to be in close touch with the fall-out from the decisions it makes.

“We welcome the Government’s commitment to achieve on-going operating surpluses without resorting to higher taxes and charges and delivering a further reduction in the payroll tax threshold. Surpluses are a welcome development given the large falls in stamp duty revenue facing NSW over the next few years and it should be noted that growth in revenue from payroll tax is indicative of the strength of NSW business employment.

“However, the Government is rightly frustrated at the limitations the federal system places on States’ ambitions to reform to meet future challenges. As outlined in our pre-Budget Statement, the NSW Government should be a national leader in the campaign on genuine and comprehensive tax reform at both state and federal levels to meet the needs of a modern economy and underpin the wellbeing of the community. It is hoped the announced Review of Federal Financial Relations under David Thodey will contribute to progress in this vexed area that is so vital to national and state progress.

“One of the Government’s fiscal pillars is an outcomes focus from government expenditure, confirming the link between the budget and other policy. This no more important than in education and skills, an area the budget rightly identifies as a key state lever for productivity. NSW requires a workforce that is solidly trained in school and beyond – in STEM skills, innovative thinking capability and employability. On this front, we commend the Government’s commitment to providing 100,000 fee-free TAFE and VET courses to support the pipeline of skilled workers across the State. The next step is allowing the VET system to quickly absorb the requirements for digital skills across a wide range of sectors. The greatest gains lie in reversing the declining relative standards of literacy and numeracy, fundamentals that underpin our long-term economic performance and social cohesion.

“We commend the Government for its continued focus on driving high quality economic and social infrastructure which is critical to supporting the development of the State’s productive capacity, reducing the costs of doing business in the longer term and improving living standards across the community.

“It will be important that project delivery is strongly focussed on competitive local capacity, capability and supply chains to ensure that we maximise the benefits for our local communities and taxpayers. This includes conformity with appropriate standards to ensure the integrity and safety of the built environment as well as making sure taxpayers get value for money through the life of infrastructure, not from just buying cheap up front.

“Spending initiatives to fast track regional infrastructure and support regional communities are also welcome, including the new regional economic stimulus package to extend emergency support for drought affected areas.

“Business acknowledges the importance of strong social programs in the budget that also have important economic impacts, including initiatives on mental health, school breakfast programs and regional community support.

“The Budget’s objectives of making NSW a good place to do business and a great place to live will be challenged unless the Government can quickly establish where and how affordable gas supplies can be secured for the well-being of NSW businesses and to relieve cost of living pressures on the community. The state is facing a shortage of gas for domestic use and for large industrial users who provide thousands of jobs and feed into the broader energy market. We need to unblock production barriers while ensuring community concerns are answered, and work to establish a clear pathway and timetable for a more competitive gas market.

“Issues that received little additional attention in this Budget but which are very important for the State’s future include energy efficiency improvement for both industry and households, managing our domestic waste streams and facilitating greater collaboration between business and our research sector,” Mr Goodsell said.

/Public Release. View in full here.