NSW election budget takes infrastructure to new levels

“This budget is about reform,” NSW Treasurer Matt Kean began his speech on Tuesday. Extra spending in a pre-election budget – the state goes to the polls on March 25 next year – is not economic reform, however. The budget had plenty of spending but little reform, despite the fact Mr Kean used the word 10 times. His reforms to give “our children the best start to life” and “to break the barriers to women’s opportunity in this state”, while welcome by many families, are not economic reforms. They are about big spending on childcare, $5bn, and on pre-kindergarten education, $5.8bn, both across a decade. At least Mr Kean is transparent: his observation that “following the courageous advocacy of Brittany Higgins and Grace Tame, we saw an outpouring of frustration and calls for change from women across our country” was a pitch for women’s votes. But it comes with a promised economic dividend. In tandem with federal childcare commitments, the changes are expected to lead to as many as 95,000 women entering the workforce or taking on more hours, growing the economy by up to $17.1bn a year.

The one budget initiative closer to the term reform is the move to give first-home buyers the choice of paying an annual property tax instead of stamp duty. The option will get young people into homes sooner and has the potential in the longer term to simplify the tax system. For a home with a $1m land value, homebuyers opting for land tax would be exempt from $45,000 in stamp duty on top of the purchase price in favour of paying a land tax of $3400 a year. The land tax “opt-in” would require homebuyers to accept they face an indefinite annual tax on the family residence that would be charged in addition to council rates. To avoid an even larger slump in stamp duty revenue, which is likely as property prices fall in an economic climate of rising interest rates, the land tax option will be available only for buyers of homes with an assessed land value of up to $1.5m. But it is an approach to property taxation other jurisdictions are likely to consider.

While NSW has had a well-earned reputation in recent decades for fiscal rectitude, Mr Kean, unlike his Queensland counterpart, could not manage a budget surplus for the 2021-22 financial year. The deficit will be $16.6bn, revised up by three times the $3.6bn forecast in the December half-yearly review. But it is projected to improve to an $11.3bn deficit next financial year. The most populous state continues its impressive infrastructure record, however, with $112.7bn in the pipeline for the Western Harbour Tunnel, extending the M6, upgrading the Great Western Highway and building a Metro network for Sydney. The budget also provides for a start on stage two of the Parramatta Light Rail and faster rail between Sydney, Newcastle and the central coast. Conscious of voter frustration in other states that skimp on services – which was most evident in the South Australian election in March – the Perrottet government is building and upgrading 23 schools, building 30 new ambulance stations and continuing to build or upgrade 45 hospitals.

As NSW prepares for an election, cost-of-living pressures, jobs and growth will be vital to voters. Because NSW comprises a third of the national economy, its performance matters to all Australians. The budget has its sweeteners, pumping about $7.2bn into households through toll rebates and one-off bonuses for healthcare workers. But it is confidence, jobs, investment and growth that matter, not rhetoric.