NSW Budget 2020-21: A plan for post-pandemic prosperity

NSW Budget 2020-21: A plan for post-pandemic prosperity

Today, Treasurer Dominic Perrottet has handed down the State Budget, labelling it a ‘plan for a prosperous, post-pandemic NSW’. While delivering his fourth Budget, the Treasurer took the opportunity to reflect on a difficult year for the State, with the triple-crises of the drought, the Black Summer bushfires and the COVID-19 pandemic placing unprecedented strain on the State’s finances.

Treasurer Perrottet revealed that in 2020-21, the deficit is forecast to reach $16 billion, with net debt totalling $104 billion by June 2024. Despite the forecast, Mr Perrottet has insisted the debt load will remain manageable due to record-low interest rates. Significantly, the Treasurer said the Budget is forecast to reach surplus by 2024-25.

The NSW Government has sought to respond to these difficult economic circumstances by unveiling a package of health, social and industry stimulus expenditure. Treasurer Perrottet has also sought to continue his project to reform the State’s – and the Nation’s – approach to state level taxation. The Treasurer has signalled the Government will continue its asset recycling with the sale of the remaining 49 per cent share of WestConnex and a new scoping study to examine the potential sale of Lotteries duties.

As expected, this Budget contains a focus on health and the ongoing pandemic response. The Treasurer praised the State’s success in managing COVID-19 and committed a further $190 million to maintain the pathology testing and contact tracing systems, which he credited with enabling this strong performance. Treasurer Perrottet also stated that, to date, NSW has invested $3 billion in the COVID-19 response and the Budget includes a further $29.3 billion investment in health amidst one of the greatest health crises in Australian history. Acknowledging the mental health implications of the pandemic, Mr Perrottet announced a new drug and alcohol centre will be built in Dubbo. He also announced 5,000 funding packages for palliative care to be provided to patients in their own homes.

Treasurer Perrottet has announced a program of targeted stimulus which will see the Government invest $175 million in the television and film industry and $500 million for a voucher program to support restaurants, visitor sites and cultural attractions. The stimulus expenditure will be enhanced by a substantial investment in infrastructure, with $107 billion to be spent over the forward estimates on existing health, transport and education projects. There is also significant investment in vocational education, with $159 million for a further 100,000 training places to be provided in a joint funding program with the Commonwealth. The State will also build a new Trade Skills Pathways Centre at a cost of $57.4 million.

Alongside the direct stimulus expenditure, the Treasurer has continued his project to reform the State’s approach to revenue generation. Today, the Treasurer announced a public consultation on the potential to abolish and replace stamp duty. In addition to the decision earlier this year to bring forward the payroll tax threshold to $1 million, Mr Perrottet revealed the State will increase the threshold to $1.2 million from July 2020. He also announced a new payroll tax rate of 4.85 per cent will come into effect in NSW over the next two years. The changes to payroll tax will see the State forgo $2.8 billion in revenue over the forward estimates.

The Government will also spend $472 million to provide a $1,500 digital voucher to smaller businesses which are below the payroll tax threshold to meet the cost of government fees and charges. The Government will also invest an additional $1.6 billion in digital reform to support the State Government’s ongoing digital transformation project.

Finally, COVID-19 has continued to cast its shadow over the State’s social policy. Mr Perrottet said the Government will continue to provide 15 hours of free preschool per week to the end of 2021 at a cost of $120 million. Acknowledging the disproportionate impact of the recession on female workers, the State Government committed a return-to-work grant of up to $5,000 to support women returning to the workforce. The Budget also contains support for not-for-profits with an additional $50 million to assist the sector to adapt. The State Government has also committed $812 million for social and affordable housing, with an additional 1,200 dwellings to be delivered and 8,000 dwellings to be upgraded over the coming years.

For further information on key NSW portfolio measures, please refer to GRACosway’s detailed briefings:

KEY PARAMETERS

$16 billion deficit
$22.6 billion in capital expenditure
Net debt to reach $53.2 billion, and peak at $104 billion by 2023-24
Gross state product to decline by 0.75 per cent, before growing by 2.5 per cent in 2021-22
$107 billion invested in infrastructure over the forward estimates
$14.8 billion reduction in revenue over the next four years
General Government Revenue to reach $82.1 billion

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