New South Wales (NSW) is to head into its sixth straight year in deficit, something state Labor Treasurer Daniel Mookhey blames entirely on the Commonwealth Grants Commission’s decision to cut NSW’s share of GST revenues by $11.9 billion over the next four years.
The treasurer has branded this decision an “absurdity” which would impose “austerity” on the state.
The state’s Budget, delivered by Mr. Mookhey on June 18, says the deficit of $9.7 billion will gradually reduce to $1.5 billion by 2027/28.
This year the state will be $3.6 billion in the red (down from the $0.5 billion surplus projected in the 2023/24 Half-Yearly Review).
In response, the Budget announced the suspension of the remaining contributions to the $15 billion NSW Generations Fund and instead “redirects [it] towards infrastructure investment and essential services.”
The Fund, created by former premier, and then-Treasurer Dominic Perrottet in 2018, was seeded with $7 billion from the sale of the WestConnex Motorway and $3 billion in cash reserves.
It had been used to make the state’s deficit look smaller and to project surpluses that didn’t exist. The Minns Labor government will attempt to significantly restructure it.
But, while government spending has been reduced, Mr. Mookhey said it would “carefully absorb” the deficit, rather than hurt families and businesses.
Target Set to Build 370,000 Homes
Much of the Budget focuses on housing.A tenth of the lost GST will be recovered by scrapping annual indexation on land tax rates, instead freezing the tax-free threshold at the 2024 level of $1.075 million.
That’s forecast to net the government $1.68 billion over the next four years, with the funds earmarked for building new homes. The tax applies to holiday homes, investment and commercial properties, but not primary homes and farms.
And fees paid by foreign investors and international home buyers will increase from Jan. 1 next year.
The foreign purchaser duty surcharge will rise from 8 to 9 percent, and the foreign owner land tax surcharge will also increase by 1 percent, to 5 percent. About 20,000 homes, or about 0.6 percent of the state’s housing stock, are foreign-owned.
The government has set itself an ambitious target of building 377,000 new homes over the next five years and will spend $253.7 million to hire more planners and to invest in technology to reduce the time used to assess development applications.
It has also introduced a pilot financing guarantee to support the construction industry, which faces challenging market conditions, including high labour and material costs. The government could act as a guarantor for some development loans and pre-purchase homes in high-density builds.
The lack of affordable inner-city housing for essential workers—such as paramedics, nurses, teachers, police officers, and firefighters—will be addressed through the establishment of a $450 million fund to build more than 400 build-to-rent homes across four sites in the next three years.
Homes NSW will get 8,400 new homes at a cost of $5.1 billion. At least half of them will be prioritised for victims of family violence.
The state will also spend $1 billion to repair 33,500 existing public and social homes across the state. About $200 million of this will be spent on stock managed by the Aboriginal Housing Office.
Renters also stand to benefit from the establishment of a Rental Taskforce within NSW Fair Trading at a cost of $8.4 million.Incentives to Increase Bulk-Billing
Family doctors will gain from a $189 million package over four years to reduce the cost of running a GP clinic.It’s hoped this will encourage them to bulk bill more patients. The programme will be delivered through changes to how payroll tax works, and Mr. Mookhey announced that the NSW government would waive all historical payroll tax liabilities for GP clinics at a cost of $104 million.
The remainder will take the form of an ongoing payroll tax rebate for wages paid to contracted doctors to clinics in Sydney, provided they bulk bill more than 80 percent of their patients. In the rest of NSW the threshold will be 70 percent.
NSW Health estimates that a 1 percent increase in bulk billing equates to about 3,000 fewer emergency room presentations.
Upgrades to hospitals and health facilities will cost $3.4 billion, including $1 billion set aside for rural and regional capital works.
Major Light Rail to Receive $2 Billion
The second stage of Parramatta Light Rail is to receive $2 billion and will begin before the next state election in March 2027. The 10-kilometre extension will feature 14 stops between Camellia and the Parramatta CBD.Buses will receive a $91 million overhaul, including equipping vehicles with onboard screens, audio announcements, and new technology to better monitor bus services.
Another $24.7 million over four years will increase services, create new routes, and fund Zero-Emission Buses (ZEBs) in Western Sydney.
Cut to Consultants, But Public Service Receives Wage Rise
Following a report by NSW’s Auditor-General, which found that more than 10,000 consultant contracts were issued in the last five years of the former government, Labor committed to reducing spending on contractors by $35 million a year.Price Cap on Wholesale Power Costs NSW Residents
Budget documents have revealed the cost of a federal government policy that capped the price of black coal at $125 a tonne, subsiding power stations which paid over that figure.Origin Energy, which had fewer long-term coal contracts than some rivals, is a major beneficiary of the policy.
This is in addition to the already announced news that the life of its Eraring coal-fired power plant would be extended for two years to August 2027 and underwritten by the state to a maximum of $450 million.
