Flush with funds from the longest housing boom in a generation and the nation’s most buoyant economy, the NSW government has fast forwarded $591 million in capital spending, while committing to record four-year spending in infrastructure, health and education.
The 2015-16 budget, announced by new Treasurer Gladys Berejiklian today, promises four years of surpluses in excess of $2 billion each year, with an expected surplus in the coming financial year of $2.6 billion. The surplus doesn’t include the impact of the partial lease of electricity assets and the loss of dividend revenues.
Bringing forward the spending is designed to ensure projects are shovel-ready when the lease proceeds arrive, and includes fast tracking of a second rail link under the harbour, and a new high-profile rail station at the multi-billion-dollar Barangaroo project, which includes a new casino for Mr Packer’s Crown group.
Faced with booming population growth as workers migrate back from the mining states, the Treasurer also announced the government would spend $7 million on a crack planning team to halve the time it takes to assess significant programs.
But while strong financial management and a surging property and construction market has enabled the NSW government to spend at record levels, weaker GST and stamp duty, reduced payments from Canberra and lower utility dividends are expected to see revenue growth taper down from an average of 4.2% to 2.8% over the next four years.
To compensate, the nation’s biggest state government has capped operational spending growth to 2.8%, matching expected revenue growth over the period.
The budget commits to $1.1 billion in savings over the forward estimates, through efficiency dividends, removal of duplication and $404 million in procurement reforms. This builds on $5.1 billion in savings since the change of government in 2011.
Public sector wage growth is to continue to be constrained to 2.5%, with a labour expense cap to continue to apply to all agencies.
Rather than build up a larger surplus to accommodate any economic downturn, this year’s budget boasts five areas of record capital spending, with infrastructure spending estimated to average $10.3 billion over the next four years.
Over the next four years the government has committed to $38 billion in spending on road and rail, $5 billion in hospital spending and $2 billion in schools and TAFE spending.
The capital spending program is expected to be further boosted by $20 billion from the lease of electricity assets.
Net debt is expected to settle at 2.6% of gross state product or $15.8 billion, up from the current level of 1.6% of GSP. These forecasts do not include the yet to be realised electricity lease changes. Berejiklian said maintaining the triple-A credit rating was one of the government’s key priorities.
Changes to bring NSW into line with other states by accounting for rail assets as equity injections have affected financial reporting comparisons. Without these changes, the surplus would have been $713 million.
Read more at The Mandarin: Tom Burton: Don’t mention the B word in Sydney