2019-20 NSW State Budget

2019-20 NSW State Budget

NSW Budget delivers on election commitments despite gathering headwinds

NSW Treasurer Dominic Perrottet’s third State Budget has a laser-like focus on meeting election promises, delivering record infrastructure spending and a significant fillip for the drought-ravaged regions. However, it comes in tightening economic circumstances as stamp duty and GST revenues dissipate, a trend which is likely to force tougher decision making on expenditure including public sector spending.

There is a lot of good news that reflects well on the strong Budget discipline of recent years: the Budget includes a colossal $93 billion for infrastructure over the next four years and a strong focus on health and education where the Government will fund 4,600 new teachers, 5,000 new nurses and midwives and 3,300 more health professionals. The Government has also committed to a massive school infrastructure program, which will deliver 190 new or upgraded schools.

But, at the same time, the Treasurer has warned of strong economic headwinds ahead. Declining stamp duty receipts are really starting to bite, with the Budget including the largest revenue write downs in NSW history.

On the policy front, there were no big surprises today. This is a Budget squarely focused on delivering on the promises made in the March election and addressing weak points from the campaign, namely perceived inequality in the regions, the drought and water policy.

The numbers

The Budget outlines an $802 million surplus for 2019-20 – almost half of what was forecast in last year’s budget, thanks largely to the impact of the cooling housing market.

  • The Treasurer expects surpluses averaging $1.7 billion over the four years to 2022-23.
  • NSW’s infrastructure spending will grow to a record $93 billion (a record $55.6 billion budget for road and transport projects).
  • The soft housing market has wiped $10.6 billion in forecast stamp duty from the Budget since 2017.
  • The Federal Budget in April cut a further $2.3 billion in GST receipts.
  • Thanks to the Government’s ambitious infrastructure program, the State’s net worth will surpass $310 billion by 2023.
  • The health infrastructure budget hits the $10 billion mark for the first time, with new facilities or upgrades planned for every corner of the State.

Continued focus on infrastructure delivery

The Budget includes a number of announcements designed to show progress against election commitments, with the emphasis on progressing major infrastructure projects like WestConnex; Metro City and Southwest rail lines and breaking ground on Metro West next year.

At the same time, work is ramping up on the Parramatta Light Rail project, with $561 million allocated in the Budget, and planning and preparation is continuing for the Western Harbour Tunnel, Beaches Link and the first stage of the F6 Extension.

A Budget for the bush

Acknowledging our farmers are living through the worst drought in living memory, and in a nod to the Government’s lacklustre election result in the regions, this Budget is, as the Treasurer said, one ‘for the bush, with farmers at its heart’.

Despite tough economic conditions, the Treasurer has attempted to provide a fairer share to the regions with major investments in roads and infrastructure and an increase in services, staff and upgrades for regional health and education.

Total drought-related support has increased to $1.8 billion, which includes transport subsidies for stock, fodder and water, emergency water supplies and waiving some government fees and charges.

The Government has also looked at other means of bush stimulus, announcing the fast-tracking of $170 million for local infrastructure projects.

The number one issue west of the divide remains water. Accordingly, there is $1.4 billion worth of water security projects including the raising of dam walls, building pipelines and developing water augmentation strategies.

Over and above all of this, the $4.2 billion proceeds from the sale of the State’s share of Snowy Hydro will be invested in major and transformational regional infrastructure. 

Belt tightening in the public sector

The Budget has significant implications for public service jobs and spending, with some $3.2 billion to be cut from departmental budgets. The cuts translate to about 3,000 jobs but the Treasurer pledged these would be back of house, not frontline jobs. Among widespread changes are more than $700 million in procurement cutbacks and abolition of bonuses for senior executives, while long service leave benefits will be brought into line with community standards.

Digital revolution

On the other hand, the digital customer service revolution is well under way with $100 million to establish a Digital Restart Fund to support whole-of-government digital transformation. There are plans for more Service NSW centres and the introduction of digital drivers’ licenses.

Putting the Federal Government on notice

In his pre-budget media appearances, the Treasurer has made it clear he will not be giving his Coalition colleagues in Canberra an easy ride. The Treasurer has reiterated his position that States which do the hard work when it comes to fiscal policy and productivity should be rewarded, not made to pay for those who don’t.

He also pushed the need for Federal Government support for large, congestion-busting infrastructure projects. In particular, Mr Perrottet will be hoping the Federal Government will match the $3b that had been promised to Metro West by then Federal Opposition Leader, Bill Shorten.

Will the Government turn to asset recycling once again?

The tough economic conditions outlined in the Budget will have many asking if the Government will return to its successful asset recycling program championed by former Premier Mike Baird?

In the lead up to the election, the Premier ruled out any future asset sales, but recent comments from the Treasurer and Transport Minister seem to have left the door open – especially if the Federal Government re-instates their asset recycling program.
With several infrastructure projects approaching critical points in their delivery, the Treasury will be looking for new, creative ways to fund them.

What’s next?

As always, the Opposition will have their opportunity to respond with the Budget reply due to be delivered on Thursday. In a break from tradition, this year’s speech will be delivered by Shadow Treasurer Ryan Park. Typically, this honour is reserved for the Leader of the Opposition, but interim-Leader Penny Sharpe is a Member of the Legislative Council, and therefore unable to address the Legislative Assembly.

On that front, the result of Labor’s leadership challenge will be announced at the end of the month. We will be in touch then to share our insights.

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