NSW to lose over half a billion dollars in GST revenue as Treasurer delivers lower surplus
More than half a billion dollars of GST revenue meant for NSW this year has evaporated as consumers keep wallets and purses closed.
NSW
Don't miss out on the headlines from NSW. Followed categories will be added to My News.
More than half a billion dollars of GST revenue meant for NSW this year has evaporated as consumers keep wallets and purses closed.
However tax on G&Ts has surged with excise on gin and other spirits rising by 5.5 per cent in defiance of the trend.
The federal government now expects to hand over $18.19 billion to NSW this financial year, down from a forecast of $18.71 billion in April.
The Berejiklian government had been anticipating yesterday’s federal Mid-Year Economic and Fiscal Outlook (MYEFO) would contain a haircut. But not a No. 1 all over.
NSW was expecting a reduction of $352 million. Instead the MYEFO warns it will get $522 million less.
That extra $170 million is what it costs to build a regional hospital. It is also equal to the state’s rural infrastructure stimulus in the most recent NSW budget.
The GST disappointment is due to households reining in their spending. But while taxes on beer and cigarettes are expected to fall spirits will bring in an extra $130 million because of an increase in the amount being imported — and consumed, Treasury said.
Just seven months ago federal Treasury’s forecast for consumer consumption growth this financial year was 2.75 per cent. Now it is 1.75 per cent. That blows a $1.8 billion hole in GST revenue nationally for 2019-20.
The federal government is hopeful householders will soon begin to get the economy tap-and-going as the halo effect of higher house prices leads them to spend not save.
Treasurer Josh Frydenberg said tax cuts had already increased disposable income.
“That’s money in pockets,” Mr Frydenberg said. “Yes, some people are saving while others are spending. Ultimately it’s up to the Australian people to decide whether they spend or they save. Consumption will pick up as more of that money is spent.”
The slump in GST receipts is a key factor in the 2019-20 surplus forecast being slashed by $2 billion to $5 billion. The sizes of future surpluses have also been reduced.
The winding back of predictions for GDP growth to 2.25 per cent this financial year is reflective of the current preference for saving over spending — household consumption is more than half of the economy.
Wages are forecast to rise by 2.5 per cent, also down from 2.75 per cent.
Labor attacked the government over the downgrades.
“Remember Scott Morrison and Josh Frydenberg made a central part of their election pitch that they would make the economy even stronger, but instead, as these numbers show, the economy has gotten substantially weaker on their watch,” Opposition treasury spokesman Jim Chalmers said.
Mr Frydenberg said the Coalition was doing a better job than Labor would have had it won power.
“When it comes to real minimum wages, they were down in three out of Labor’s six years in government,” he said. “They have gone up every year under us..”
Mr Frydenberg said the annual interest bill on debt would fall from $19 billion to $14.5 billion.
Acting state Treasurer Damian Tudehope’s spokesman said NSW’s budget surpluses ensured “a stable and responsible approach to managing the economy, and means NSW has the ability to absorb variations in revenue.”
Awning collapses onto inner-Sydney footpath
Bricks and sheets of iron have collapsed onto a footpath in inner Sydney this afternoon, following a surge of heavy rain and winds.
Experienced sailors who died during Sydney to Hobart identified
Two experienced sailors died of head injuries in separate incidents during the Sydney to Hobart race overnight. Police are now working to figure out how the tragedies occurred.