Jobs and growth is more than rhetoric in NSW

The NSW budget should be an example for other states.

NSW is the quiet achiever of Australia’s governments, an example to the others, including those in Canberra and especially Brisbane, of how to combine reform, popularity and economic success. Gladys Berejiklian’s second budget — the Coalition government’s sixth since its 2011 landslide victory — continues a program of modest tax reform, privatisation, record infrastructure spending and prudent expense management that have contributed to NSW’s economic boom. Australia’s oldest and most populous state, making up around a third of the country’s GDP, created 142,000 new jobs over the last year, or almost two-thirds of the national total. State demand growing four times as fast as the national average. People are leaving NSW at the lowest rate since the 1970s, at the same time as the state hoovers up a the largest share of immigrants into Australia since the early 2000s. The budget is in surplus, and the state’s net worth is on track to rise 30 per cent over the next four years to $247bn.

The state’s services-dominated economy (90 per cent of all jobs) is benefiting from ultra-low interest rates and the inevitable transition away from mining. But the government’s remarkably successful privatisation program — centred around the long overdue long-term lease of 49 per cent of the state electricity distribution networks — is creating jobs in the short term and boosting the state’s productivity potential in the long term. Annual infrastructure investment is about to exceed more than $12bn a year, double the level of only six years ago. Voters can look forward to new or improved rail, road, education, and housing projects and even a new stadium for Western Sydney.

This privatisation model is one Queensland should consider, whose Labor government for ideological reasons seems determined to keep the state’s power assets entirely in government — and union — hands, denying its citizens the prospect of an infrastructure overhaul and more efficient electricity provision. While NSW has put a 2.5 per cent cap on public sector wage growth, helping curb growth of its expenses from near 8 per cent under the previous Labor government to a more sustainable 4 per cent, its 294,000 strong payroll remains too large and ripe for efficiencies.

Tax reform is another weak point. The Coalition is removing duties on business mortgage and non-real assets — fulfilling the spirit of federal-state GST agreements going back to 2000 — and shifting the burden of the fire services levy from insurers to households. The new 0.75 per cent flat rate land tax on foreign property combines good economics with political populism. The principle should be extended to allow significant cuts to stamp duty — the most damaging tax. Any shift would need to be phased in gradually and households that had recently forked out on stamp duty exempted. Moreover, the fact that NSW raises less than 40 per cent of its own revenue — an even larger share comes from Canberra — signals the need for a major overhaul of federal-state financial relations.