NSW Budget 2020: Cash boost for business, debt to blow out
Every business in the state will receive a cash boost in the most significant stimulus budget in history, as NSW stares down a looming debt bomb of $104 billion.
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Every business in the state will receive a cash boost in the most significant stimulus budget in history, as NSW stares down a looming debt bomb of $104 billion by 2023.
Treasurer Dominic Perrottet has handed down a budget designed to pump cash into the economy quickly in a bid to resuscitate the state’s limping COVID economy, posting a 2020-2021 deficit of $16 billion in a move which puts “people before the budget position,” he said.
Small business will be given $1500 in vouchers to help pay for government fees and charges, putting their recovery at the heart of the budget. The move, which costs $500 million, is strictly for businesses which do not pay payroll tax – ensuring relief in this budget is not just felt by bigger businesses.
And in a major shot in the arm for all larger businesses, the Treasurer revealed today payroll tax rate will be cut from 5.45 to 4.85 per cent for a two-year period, backdated to July 2020.
This comes on top of an increase in the threshold from $1 million to $1.2 million. On average, businesses liable for payroll tax will save about $34,000 a year over the next two years – which the government hopes will be reinvested into new staff.
The other major cash boost is four lots of $25 vouchers for every adult in the state to spend on dining and entertainment.
There’s also a record spend on infrastructure, boosting the pipeline to $107 billion targeting shovel and screwdriver ready projects.
The NSW Government has unveiled a $107 billion spend on infrastructure, health, education and transport to create 145,000 jobs across the state.
The record spending on infrastructure includes $10.4 billion on the Metro West to double rail capacity between Sydney and Parramatta CBDs, $9.2 billion on the metro rail to the new Western Sydney Airport and $2.2 billion on the Sydney Gateway to improve the road links between the airport and Port Botany.
There will also be more than $10 billion spent on health infrastructure over the next four years to deliver 47 new and upgraded hospitals including the redevelopment of Tweed and Campbelltown hospitals. Millions more will be spent on the maintenance and upgrade of social housing, courts, police stations and parks.
Tax reform is also flagged, with Mr Perrottet today opening a consultation process on his plan to give buyers a choice to axe stamp duty in favour of ongoing land tax. And under the proposal, existing stamp duty concessions for first home buyers could be replaced with grants of up to $25,000.
“Doing nothing would inflict long term damage on future generations and we won’t let that happen,” Mr Perrottet said in his speech announcing the budget.
“Our stimulus will be unprecedented in scale and quality – tenaciously targeted to generate jobs.
“But make no mistake – public spending is not a permanent solution. Stimulus today does not mean stimulus forever.”
The budget posted a deficit of $6.9 billion for 2019-20, which will blows out to $16 billion this financial year.
Net debt is $53.1 billion in 2020-21 – or 8.4 per cent of gross state product. This blows out to $104.3 billion in 2023-24 or 14.7 per cent of GSP.
The numbers are underpinned by revenue being written down to the tune of $25 billion over five years.
State final demand has also contracted by 10 per cent, primarily through a decline in household consumption.
But the cost of borrowing is so cheap, the state is now borrowing five times what it was in 2010, but the cost of servicing that debt is the same as a proportion of revenue.
The government says at the heart of the budget is a commitment to put people before the budget result.
The budget paves a clear course back to surplus over the medium term – by 2024-25 in current conditions.
The budget notes that the impact of COVID 19 has been even worse than the GFC.
It comes against a backdrop of unemployment rising to its highest level since the late 1990s, to 7.2 per cent at the height of the pandemic.
One caveat is explicit – with the virus still active, there is higher decree of uncertainty in the forecasts underpinning the budget. The budget papers specifically note that a Victorian style outbreak would hurt them.
It also expects borders to be lifted by December 2020 – a prediction which may now be at risk with new cases in South Australia.
Mr Perrottet’s future fund brain child, the NSW Generations Fund, will grow to more than $70 billion by the end of the decade – the aim of this is to ensure the government does not leave future generations to bear the cost of the pandemic.
The commitments in the budget bring the government’s total COVID-19 response to $29 billion.
It comes as the number of tourist arrivals to NSW has “effectively fallen to zero” and it may take several years for tourism exports to return to pre-COVID levels, the budget predicts.
While a gradual recovery is expected with the initial opening of a trans-Tasman bubble with New Zealand and a slow lifting of international border restrictions, the budget papers forecast this will depend on health outcomes in other countries and a vaccine.
“Nevertheless, it may take several years for tourism exports to return to their pre-COVID-19 levels,” the budget papers state.
“The International Air Transport Association expects global air travel will not return to pre-COVID-19 levels until 2024.”
A whopping $3 billion will be collected from NSW residents in fines and fees during this financial year, the budget predicts.
And it’s set to grow at an annual rate of 4.2 per cent.
Budget papers reveal fines alone - from motorists nabbed by red light cameras to various court fines - will grow by 9.7 per cent and rake in a staggering $3.2 billion over four years.
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