Today the NSW Government handed down its 2017-18 Budget. The NSW Budget sets out how the Government raises revenue, where the money is spent, and what the Government thinks will happen to the NSW Economy.
The NSW Business Chamber Policy and Advocacy team were in the budget lock up to undertake an analysis of what the budget will mean for business and how the changes will impact our members.
Set out below are the key budget measures and the overall financial position of NSW.
1 — Budget Position and Economic Forecasts
Government finances are in a strong position with a $4.5bn surplus expected for 2016-17, equal to 0.8 per cent of Gross State Product (GSP), and a surplus of $2.7bn is expected for 2017-18 (0.5 per cent of GSP).
- Surpluses are expected to moderate to $1.5bn over the years to 2020-21. Projected surpluses are built off the back of stamp duty revenues surpassing $10bn and very modest expenses growth of 2.8 per cent over the forward estimates.
- GSP is forecast to grow at an above trend 3 per cent in 2017-18 before moderating to 2 ¾ per cent in 2018-19 and 2020-21. The key drivers of growth in the near term are forecast to be overseas exports, dwelling investment and public capital expenditure. The NSW economy continues to be buoyed by low interest rates, a low Australian dollar and strong population growth.
2 — Tax
The Budget announces the removal of a number of insurance duties to benefit small businesses with an aggregate turnover of under $2m. By 2018‑19, these changes will help save businesses almost $100m each year.
- These taxes include insurance duty on commercial vehicle insurance, professional indemnity insurance and product and public liability insurance. With insurance duties among the most economically harmful taxes, these changes will have significant economic benefits beyond the immediate savings to business.
- Unfortunately,there are no changes to payroll tax announced in this Budget. This remains a priority area for NSW Business Chamber advocacy, with our members indicating tax administration costs of more than $10,000 once their payroll exceeds the current threshold of $750,000.
- Despite targeted changes to assist first homebuyers, the Budget continues its over-reliance on stamp duty which, for the first time, is expected to exceed $10bn. The additional stamp duty collected by the NSW Government (compared with what other states collect) dwarfs the size of recent and projected surpluses.
- Other tax changes previously announced include an increase in the stamp duty and land tax surcharge on foreign property investors, the abolition of lenders’ mortgage insurance duty and the reintroduction of the emergency services levy on insurance premiums.
3 — Urban Transport and Infrastructure
The Budget includes $72.7 billion over four years to deliver key infrastructure projects and improvements across NSW, with more than half allocated to transport capital works. Key infrastructure projects in Sydney include:
- $1 billion in 2017-18 for to continue construction of Western Sydney roads including those to support the Western Sydney Airport.
- $1.8 billion in 2017-18 to continue construction of the WestConnex motorway.
- $8.9 billion in funding over four years for the Sydney Metro projects (Sydney Metro Northwest, Sydney Metro City and Southwest).
- $38.1 million for new motorway planning including the M6 (connecting southern Sydney), M9 Outer Orbital (west of M7 running north to south) and M12 (linking M7 to Western Sydney Airport) and $21 million for Smart Motorways on M4 and M1 motorways.
- $973 million to upgrade Campbelltown and Concord hospitals.
- 176 new buses, including six double-deckers which will add 3,300 new services to the network per week; $658 million for 24 new air-conditioned suburban trains; $1.4 billion in 2017-18 to maintain current Sydney Trains network; and $10 million towards new Parramatta and Sydney CBD ferries.
- $244 million over 2017-18 to expand the Art Gallery of NSW as part of the Sydney Modern Project and $190 million over four years for a Sydney Opera House upgrade.
4 — Regions
The Budget provides a number of infrastructure initiatives for regional NSW. This includes confirming the ongoing commitment of 30% of the Restart NSW fund (circa $6 billion) for regional NSW.
New initiatives announced in the Budget include:
- The Regional Growth: Economic Activation Fund utilises $1.0 Billion of Restart NSW funds to improve regional connectivity through better communications and infrastructure as well as projects that support tourist access and amenities.
- $200.0 million over three years toward a Stronger
Country Communities Fund to support public
- facilities such as swimming pools, health centres and community halls.
- $100 million over four years for a Regional Cultural Fund to invest in new arts and cultural facilities; upgrading existing galleries, theatres, libraries, museums, halls and other cultural spaces; and supporting projects that take exhibitions on tour.
5 — Jobs, Education and Training
The Budget does not confirm any significant new skills initiatives, although investment in the employment, education and training initiatives announced in last year’s Budget continues:
- The Government investment in vocational education and training will continue. This includes $1.7 billion for TAFE NSW and $759 million for contestable Smart and Skilled training via TAFE and other approved providers. No reduction in funding for VET is reported, despite the Commonwealth Government reducing its investment in the sector in the recent Federal Budget.
- The second year of funding for the Smart, Skilled & Hired Program will be provided, with $40 million to be spent on measures to engage young people in Western Sydney, the Central Coast, New England and the North Coast in the construction and disability sectors.
- One area which will see enhanced investment is early childhood education. The Government will spend an additional $217 million for the Start Strong program that aims to boost participation in community.
- A further $96 million will be invested in Jobs for NSW. This includes $25 million for a public-private investment in growth companies, in addition to $20 million for a start-up hub in Sydney. The Chamber supports the new opportunities this will create for start-up businesses to grow their potential and contribute to the broader economy.
6 — Housing
Building on its announcements to provide a range of stamp duty concessions to first home buyers, the Budget also includes $117.8 million in 2017-18 to help deliver new infrastructure to help drive housing supply as well as to review land use and infrastructure strategies for priority growth areas and implement regional plans.
A copy of the Chamber’s media release can be found here. A full copy of the budget papers including summaries on key initiatives and the Treasurer’s Budget Speech can be found at: www.budget.nsw.gov.au.