There used to be a product on the market called a cream-between. It was a slab of ice-cream with two very unappetising wafers on either side. By comparison with the budgets of Queensland and Victoria, the NSW budget is that slab of ice-cream.
Not that the ice-cream was particularly good quality, but it was definitely better than the wafers. Of course, saying that the NSW budget is better than two examples of vote-buying fiscal profligacy amassing unsustainable levels of government debt is faint praise. It’s meant to be.
The NSW Treasurer, Daniel Mookhey, has carried on about being dudded by the GST deal to the tune of $12bn, although in reality there is not really much to see. After all the special (and egregious) deal with Western Australia carries a no-worse-off guarantee for the other states. And NSW has always been a donor state. Extrapolating GST payments, something which the Commonwealth Grants Commission does not do, is a highly manipulable exercise.
The political trick that Mookhey is trying to pull off is as old as the hills: don’t blame me for the river of red ink in the budget. If only the feds had given NSW more money, things would be different. He is also not above putting some of the blame on the previous Coalition government.
In some ways, he does have a point about the Coalition government. Imagining that the NSW Treasury could play the role of government-backed investment bank, the NSW Generations Fund was created as a sovereign wealth fund. It was always a stupid idea because the capital was largely just borrowed money.
Minns and Mookhey used common sense to pull the pin and this budget, like the one before it, does not provide any further contribution to the NGF. Sadly, however, the Minns government is showing no inclination to turn its back on the renewable energy plans of the previous government.
The silly giveaways to voters also continue albeit in slightly different forms. There is energy price relief for some, subsidised kindy for eligible parents, a cost-of-living handout to essential workers.
As far as the fiscal outcomes are concerned, the budget is predicting operating deficits in the four years of the forward estimates; that will make it six deficits in a row. This result is notwithstanding a revenue windfall of close to $12bn over the four years, mainly arising from property taxes.
Net debt rises from close to $100bn in 2023-24 to $139bn in 2027-28. Gross debt hits close to $200bn at the end of the forward estimates, having been only $29bn in 2011-12. The ratings agency will be having a close look at the books. Two of the agencies have NSW on AAA, but this may be about to change.
If there is one theme to this budget, it is the government’s determination for more homes to be built, although not necessary ones that would be the occupants’ first preference. Owning a dog box of an apartment built over a railway line and without any garaging might be better than the alternative, but only just.
But large licks of money are allocated to social housing, affordable housing and the speeding up of the development approval process. Whether the plans will be realised is another matter altogether. As is the case with the commonwealth, simply setting targets for numbers of homes to be built really guarantees nothing.
It is also noteworthy that the budget’s forecast rate of population growth in NSW falls dramatically over the forward estimates – from 2 per cent last financial year to only 1 per cent at the end of the period. This will be dependent on the federal government managing to get the migrant intake under control.
The bottom line is that Mookhey’s second budget is not as bad as either Victoria’s or Queensland’s but is nothing to write home about. State governments have lost the knack to run consistent surpluses and constrain the growth of debt even though the days of cheap money are well behind them. In the current context, the failure to do so makes the task of the Reserve Bank in reining in inflation even more difficult.
It probably makes sense that the cream-between is no longer available: it was basically a dud.
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