NSW LABOR’S BUDGET TARGETS ‘HIP POCKET’ PAIN POINTS AND TRIMS PUBLIC DEBT
NSW Treasurer Daniel Mookhey’s first State Budget ends the era of privatisation and meets a range of election commitments including cost of living relief for energy bills and toll roads and new wage deals for public sector workers.
With NSW Treasury forecasting elevated inflation of 4.75% this year and general economic growth at 1.25% this year, the Treasurer has sought to reduce gross debt by $14.8 billion by June 2026, saving $2.3 billion on interest payments.
A deficit of $7.8 million is expected for 2023-24 but Labor is forecasting a $844 million surplus from next year. It will redirect some $13 billion in savings to its top priorities, namely health and education, public sector wages and housing.
Mr Mookhey said privatisation was “draining family budgets” and had deepened the cost of living crisis.
- A deficit of $7.8 million is expected for 2023-24 but Labor is forecasting a $844 million surplus from next year.
- $100 million will be spent funding five energy rebates, lifting the Low Income Household Rebate and Medical Energy Rebate from $285 to $350, and the full rate Family Energy Rebate from $180 to $250.
- An allocation of $72.3 billion has been earmarked for the enhancement of transport infrastructure in various sectors.
The first budget from the Minns Labor Government promised a “thoroughly Labor document”, and that’s exactly what was delivered.
With the task of assessing the state’s financials now behind them, the job of governing and delivering on their key priorities is now core business.
Critical transmission and energy storage
- $1.8 billion investment to roll out critical transmission and energy storage solutions, including:
- An additional $804 million for the Transmission Acceleration Facility to connect the state’s renewable energy zones to the grid sooner.
- $1 billion to establish and seed the Energy Security Corporation, which will partner with the private sector to unlock investments in stable and affordable renewable energy.
Eraring power station to stay
The Government reaffirmed last week’s announcement to work with Origin Energy to keep the Eraring power station open beyond 2025. The cost of doing so is yet to be revealed.
- Investing $121 million to make communities more resilient in the face of more frequent and extreme weather events.
- Allocating $4 billion for natural disaster support including for restoring damaged infrastructure.
Net zero manufacturing
- $480 million to boost local manufacturing capacity and capability for delivering critical components for NSW’s emerging renewable energy sector will be expanded.
- Scrapping of the $3,000 subsidy and stamp duty exemptions for drivers who buy a new electric vehicle, saving $527 million.
- Redirecting $263.5 million of this money to rolling out EV infrastructure across the state (with an emphasis on regional NSW) which it says it the most significant barrier to EV uptake.
Cost of living
- $100 million will be spent funding five energy rebates, lifting the Low Income Household Rebate and Medical Energy Rebate from $285 to $350, and the full rate Family Energy Rebate from $180 to $250. The Seniors Energy Rebate will increase from $200 to $250.
- Spending on the Active and Creative Kids vouchers will be slashed from $190 million to $28 million, and vouchers reduced from $100 to $50. It will only be available for families who are on the Family Tax Benefit Part A.
- Parents of three-year-olds in long daycare preschool programs will receive $500 per child, per year, in fee relief, costing $64 million over two years.
- An estimated 720,000 motorists will be able to claim back spending above $60 on the state’s toll roads, costing $561 million over two years.
- $13.8 billion for new hospital infrastructure, including $3.8 billion for hospitals in regional NSW. The funding also includes $3 billion over four years on investments in western Sydney hospitals, including an additional $400 million to build Rouse Hill Hospital, and $1.3 billion to build the Bankstown-Lidcombe Hospital on a new site.
- $2.5 billion to recruit and retain health workers, including 1200 nurses and 500 rural paramedics.
- Health workers will receive a $3,500 flat pay rise, which will see low paid staff, such as cleaners, receive a bump as high as 8 per cent. A new salary packaging agreement will see workers retain 70 per cent of tax benefits.
Transport and infrastructure
The budget confirmed cost and timeline blowouts across a range of major projects. To address this, this budget features a highly targeted infrastructure spend. Key features include enacting recommendations of the Strategic Infrastructure Review and funding several election commitments.
An allocation of $72.3 billion has been earmarked for the enhancement of transport infrastructure in various sectors.
- This funding includes an additional $1 billion to cover cost overruns at Sydney Metro City and Metro South West
- $302.7 million to connect Penrith, Liverpool, and Campbelltown communities to the Western Sydney Airport, through the implementation of a Western Sydney Rapid Bus network.
- $200.0 million for Stage 2 of the Parramatta Light Rail Stage 2.
- $300 million for improving accessibility through upgrading train stations and car parks, including installation of new lifts, ramps and footbridges.
- The Great Western Highway duplication under the Blue Mountains has been delayed indefinitely as well as the Fast Rail Program.
- Key water infrastructure projects including the Wyangala Dam Wall Raising and the New Dungowan Dam and pipeline augmentation have also all been delayed or descoped.
- The government will also overhaul Transport Asset Holding Entity (TAHE), restructuring from a commercial to non-commercial operating model, at a cost of $384 million over four years.
Housing and planning
- In a bid to shrink the social housing waitlist by increasing supply, a $224 million essential housing package will be allocated to address housing insecurity. The funding includes $70 million to accelerate social and affordable home builds, $35.3 million for Indigenous and family housing services and $35 million to maintain existing social housing.
- $300 million reinvested in Landcom to accelerate the construction of thousands of new dwellings, with 30 per cent for affordable housing.
- $400 million redirected from Restart NSW for the new Housing Infrastructure Fund, to deliver infrastructure that will unlock housing across the State.
- $1.5 billon for housing related infrastructure raised through the Housing and Productivity Contribution levy (which replaces the Special Infrastructure Contribution (SIC)).
- $24.0 million to establish a NSW Building Commission to support high quality housing and protect home buyers from sub-standard buildings.
- $9.1 million to assess housing supply opportunities across government-owned sites, including for the delivery of new social housing.
- $5.6 million for an artificial intelligence pilot to deliver planning system efficiencies.
- Consolidating and redirecting resources from the Greater Cities Commission and Western Parkland City Authority.
New revenue measures
- Coal royalties: As announced weeks ago, the government will raise $2.7 billion over four years by hiking coal royalties for the first time in 15 years. The Treasurer pledged that every dollar will be reinvested into essential services and cost of living relief.
- Casinos: The Star casino has agreed to pay towards the introduction of cashless gaming in return for lower tax rates, this decision follows analysis from NSW Treasury that said an increase in casino tax rates could threaten the viability of the casino.
With the Labor’s first budget now behind them and priorities clearly identified, it is timely for stakeholders uplift their engagement in the lead up to the March 2024 budget.
The Opposition will deliver its Budget Reply on Thursday.
To discuss today’s budget in further detail, including what opportunities it presents for you, please contact:
Jodie Brough, Partner and Sydney Office Head – [email protected]
Clint McGilvray, Partner – [email protected]
Chris Grima, Partner – [email protected]
Amy Smith, Associate Partner – [email protected]
Jeremy Vine, Associate Partner – [email protected]