Strong NSW budget numbers good news for infrastructure spend

The New South Wales (NSW) state budget, delivered by Treasurer Dominic Perrottet, announced a forecast surplus of $2.7 billion for 2017-18, with a focus on major investments in transport, education and health infrastructure.

This surplus builds on the expected surplus of $4.5 billion for 2016-17, $800 million more than forecast in June 2016. This better-than-expected result primarily reflects an increase in revenue due to one-off transfer duty payments associated with the partial leases of Ausgrid and Endeavour Energy, as well as higher- than-expected distributions from SiCorp.

The NSW budget is forecast to remain in good health with projected surpluses over each of the next four years.

NSW continues to have negative net debt position, with the state’s assets expected to be greater than liabilities by $7.8 billion as at June 2017. 

However, as the government invests more in infrastructure projects over the coming years, NSW is expected to return to a net debt position, with net debt projected to rise to 2.7 per cent of gross state product (GSP) by 2020-21.

The New South Wales economy is expected to grow 3.0 per cent in 2017-18 and 2.75 per cent in 2018-19 and 2019-20. According to the budget papers, “This strong outlook reflects growing export demand, low interest rates, strong population growth and continued investment in public infrastructure.”

Unemployment in NSW is expected to remain a little under 5 per cent over the next two years. Inflation is expected to remain around 2.25 per cent in 2017-18 and increase very gradually over the following three years. The budget papers attribute this to “Higher global oil prices and a strengthening global economy are expected to contribute to some inflationary pressures, while competitive pressure in retail and modest wages growth will offset these to some degree.” 

Government revenue is expected to grow 2.4 per cent in 2017-18 from the previous year, driven by higher transfer duty and dividends.

Budget highlights

Infrastructure

A key focus of this budget is the state’s investment in infrastructure, with the government announcing $72.7 billion in spending on infrastructure over the next four years. The major investments include:

  • $12.1 billion for public transport infrastructure and services, including:
    • $2.8 billion to further fund the Sydney Metro Northwest and City and Southwest program
    • $658 million for 24 suburban trains and extra services across the train network
    • $1.4 billion to maintain the Sydney Trains network
    • $25 million for planning and early work for Parramatta Light Rail and $10 million towards new Parramatta to Sydney CBD ferries
  • $8.5 billion for roads, maritime and freight, including:
    • $3.2 billion to continue the development and delivery of WestConnex
    • $1.5 billion to continue the Pacific Highway upgrade program including completing all projects between Port Macquarie and Glenugie near Grafton
    • $648 million for road upgrades to support the new Western Sydney Airport at Badgerys Creek
    • $153 million for road upgrades to support population and economic growth in Western Sydney, including completing the second stage of the Schofields Road upgrade in north west Sydney

Initiatives to boost regional growth and jobs

  • $1.3 billion for the Regional Growth Fund. The funding will support rail, road, telecommunications and energy infrastructure, as well as improving sports, cultural and other community assets. The Fund includes $300 million for environmental assets, tourism infrastructure and attractions to drive greater visitation across regional NSW.
  • $759 million for skills development and training programs, including training through TAFE NSW and registered Smart and Skilled providers 
  • $65 million over three years for the Youth Employment Program to assist young people into employment 
  • $96 million to the Jobs for NSW initiative, including $25 million to launch a co-investment vehicle with the private sector to make equity investments in growth companies across NSW and $20 million to develop a site in the Sydney CBD where start-up incubators and accelerators will co-locate to foster collaboration and create jobs.

Supporting housing

The Government has announced a number of measures to support housing, including:

  • Increasing the stamp duty exemption threshold for first home buyers to $650,000 from $550,000, and stamp duty reductions for properties between $650,000 and $800,000 and including existing homes in the scheme (currently it is only available to new homes) 
  • Increasing the stamp duty surcharge for foreign buyers to eight per cent from four per cent
  • Increasing the land tax surcharge to two per cent from 0.75 per cent, including on the principal place of residence, held by foreign investors
  • Abolishing the duty charged on lenders’ mortgage insurance
  • $10,000 grant for first home buyers purchasing new homes up to $600,000
  • a First Home Builder Grant of $10,000 for people who build their first home on vacant land, where the total value of the house and land does not exceed $750,000

Health care

The Budget increases the government’s spending on health by around $1 billion to $21.7 billion, including $366 million for 28,000 extra emergency department attendances and 
45,900 extra admissions (including 3,200 additional elective surgeries). It also includes $10 million to establish an Integrated Violence Abuse and Neglect Service in NSW Health.

The budget includes $7.7 billion for building hospitals and health services, including:

  • $632 million to upgrade the Campbelltown Hospital
  • $534 million for the Tweed Hospital and Integrated Ambulatory Services Redevelopment 
  • $576 million for the Nepean Hospital and Integrated Ambulatory Services Redevelopment and the Nepean Hospital Car Park 
  • $720 million to reconfigure and expand the Randwick Hospital campus 
  • $341 million for the Concord Hospital Redevelopment 
  • $23 million to increase admitted and non-admitted mental health patient services

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Education

The Budget increases the government’s spending on education by 11.5 per cent to $15.7 billion. 

Key education initiatives include:

  • $2.2 billion over the next five years to build and upgrade 123 schools
  • $747 million over the next four years to clear the maintenance backlog in schools
  • $88 million in 2017-18 for teacher professional development through the Quality Teaching, Successful Students initiative 
  • $6.1 million over three years to support an updated anti-bullying strategy and resources for teachers, students and parents

Other budget initiatives include:

  • $244 million for the expansion of the Art Gallery of NSW’s Sydney Modern
  • $193 million to to secure and support major events for NSW, support tourism operators, develop visitor services, promote NSW to domestic and international markets and drive innovative reforms to the tourism industry
  • Abolishing of insurance duty on commercial vehicle insurance (including aircraft), professional indemnity insurance, and product and public liability insurance for businesses with an aggregated turnover of less than $2 million.
  • Abolishing duties on crop and livestock insurance from 1 January 2018
  • An “Active Kids Rebate” of $100 for sporting and fitness related costs, will be available for every family with children in school from early next year
  • $3.6 million for small business advocacy and dispute resolution services
  • $25 million for Start Safely, to help people escaping violence move into stable housing in the private rental market
  • investing $9.4 million to make it easier for small businesses to be established, through an online portal and reduction in red tape.

Read next: Federal Budget 2017: This year’s winners and losers


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