OVERVIEW of 2017-18 NSW Budget

(Translation of this article appears in Arabic section)

Earlier today, NSW Treasurer Dominic Perrottet handed down the 2017-18 State Budget.

The Berejiklian Government has managed to deliver a $4.5 billion surplus for the 2016-17 financial year, almost $1 billion more than predicted in last year’s Budget, and $500 million more than predicted in the mid-year economic update. This figure, which is just shy of the record $4.6 billion surplus in 2015-16, has been made possible thanks to ongoing asset sales—including the $2.6 billion lease of Land & Property Information in March—solid investment returns, conservative spending and continued stamp duty revenue.

The centrepiece of the 2017-18 Budget is a $72.7 billion infrastructure spend over forward estimates, as well as a $40 billion allocation to plan for new F6, M9 and M12 motorways and the Northern Beaches and Western Harbour Road tunnels. $3.3 billion will be spent on WestConnex in 2017-18, the largest single project spend.

The Premier and Treasurer said that today’s Budget is a “health and education Budget”. To this end, the Government will spend $4.2 billion in the education sector over forward estimates, including $2.2 billion for 1,500 new and upgraded schools, and a record $7.7 billion over four years on health infrastructure, including new and upgraded hospitals throughout the state.

One billion dollars will also be allocated for a Regional Growth Fund, and $1.8 billion will be spent over four years in the arts sector.

The Government’s housing affordability package, revealed at the start of this month, also featured heavily in the Budget. From 1 July 2017, first home purchases valued at up to $650,000 will no longer attract any stamp duty, while purchases valued between $650,000 and $800,000 will benefit from a discounted rate. Foreign investor surcharges for stamp duty and land tax will also double.

While other states continue to stagnate, this Budget yet again cements NSW’s position as the nation’s premier state.

THE BOTTOM LINE

The Government is projected to remain in surplus over the forward estimates, including $2.7 billion in 2017-18, $2.1 billion in 2018-19, and $1.5 billion in 2019-20 and 2020-21.

In 2017-18, growth is estimated to be 3.5 per cent, falling to 2.5 per cent in 2018-19. Inflation is estimated to be 2.25 per cent in 2017-18, increasing gradually over forward estimates due to high global commodity prices (particularly oil) and a strengthening global economy (although competitive pressures in the retail sector and modest wages growth should offset these challenges to a degree).

Meanwhile, unemployment is expected to remain at around five per cent through to 2018-19, down from 5.4 per cent in 2015-16. By 2019-20, this figure is predicted to fall to 4.75 per cent, the estimate for full employment in NSW.

The Treasurer also announced that NSW is heading towards a net worth of a quarter of a trillion dollars ($250 billion), while its negative net debt result (-$7.8 billion) is the lowest recorded by any state since records began. In the Government’s own words, “We are delivering exactly what we promised we would.”

Revenue

Total revenue for 2016-17 is expected to be $78 billion, $830.6 million more than anticipated in last year’s Budget. In 2017-18, this should rise to $79.9 billion. The Government expects the 2016-17 result to increase by an average rate of 1.8 per cent per annum over the forward estimates, a softer result than in recent years due to less GST revenue and Federal Government payments.

NSW is expected to receive $31.1 billion in Federal Government grants in 2017-18, equivalent to 39 per cent of total revenue, two per cent less than last year.

GST distribution continues to represent a challenge for NSW. By 2019-20, it is estimated that NSW will pay almost $6 billion more in GST than it receives. By 2020-21, it is estimated that the state’s share of GST will fall to just over 25 per cent, despite the fact NSW has closer to one-third of Australia’s population and contributes by far the largest share of GST. On this basis, the Treasurer is calling for major GST reform, preferably through the adoption of a per-capita allocation method.

Total taxation revenue is expected to grow by an average of four per cent over the forward estimates, and should sit at around $31.6 billion in 2017-18. As seen below, in 2017-18, 31 per cent of taxation revenue will come from transfer duty, 27 per cent will come from payroll tax, 12 per cent will come from land tax, eight per cent from taxes on motor vehicle ownership and operation, seven per cent from gambling and betting taxes, and six per cent from other stamp duties. Nine per cent of taxation revenue will come from other measures.

Expenses

Over forward estimates, expenses are expected to grow at an average rate of 2.8 per cent per annum.

While the state currently has zero net debt, the Government is planning to increase borrowing in the future to fund new and ongoing infrastructure projects.

Total expenses for 2017-18 are expected to be $77.2 billion, compared to $73.3 billion in 2016-17, a five per cent increase. The majority of this spending in 2017-18 will be in health (26.6 per cent) and education (20.3 per cent). However, the increase in expenses will be partially offset by whole-of-government procurement savings and efficiencies in service delivery totalling $1.9 billion over forward estimates.

You may request a full summary of the Government’s expenditure program in each cluster by contacting PremierState using the details provided below.

Further Information

A link to the 2017-18 NSW Budget can be found here.

Please note that specific cluster measures can be found in Budget Paper No. 3, 'Budget Estimates', while economic results can be found in Budget Paper No. 1, 'Budget Statement'.