NSW budget 2024: Spending surge sweeps in waves of deficits
A surge in spending has plunged the budget into a run of deficits, prompting the opposition to accuse Treasurer Daniel Mookhey of ‘smoke and mirrors’ after he blamed the state’s reduction in GST payments for the deterioration in the budget.
A surge in spending has plunged the budget into a run of deficits, prompting the opposition to accuse NSW Treasurer Daniel Mookhey of “smoke and mirrors” after he blamed the state’s reduction in GST payments for the deterioration in the budget.
Despite Mr Mookhey’s pre-budget spin, revenue in the next three financial years is expected to be higher than last year’s budget forecast, even after factoring in the reduction in GST grants to NSW.
Government expenses have ballooned to $122.2bn in 2024-25, and expenses across the next three financial years are $5.7bn, $6.6bn and $6bn higher respectively than what was forecast in September’s budget. Weighing on the budget are higher interest expenses, growing by 9.1 per cent annually across forward estimates to about $7bn a year.
A $1.7bn deterioration in 2024-25, confirmed on Tuesday as part of a $3.6bn deficit, due to a loss in GST revenue from the Commonwealth Grants Commission’s carve-up is a factor.
But almost $11bn more to spend over the next four years from taxation revenue higher than expected in December’s half-yearly review, and $118.5bn in overall state revenue in 2024-25, has left the Liberals accusing the government of being “beholden to its union masters” as government expenses racked up.
Three major announcements include more than $6bn for affordable and social housing, $189m as part of a bulk-billing support initiative and a restructure of the state’s funds under one roof, which represent about $46.7bn in assets, in what the Treasurer said could generate $1.6bn in returns across the forecast period.
The housing boost includes building 8400 social homes – of which 6200 will be new and 2200 are replacements, and half of all earmarked to be allocated to domestic violence victims – and a program to repair 33,500 existing homes.
The opposition said record property tax revenue should draw a “line in the sand” on Labor pointing the finger at the GST carve-up and the deficit forecasts could be part explained by a “wage spiral” in the public service.
“The Treasurer has blamed others, but what we have discovered today is that the so-called GST bogey is a myth,” opposition Treasury spokesman Damien Tudehope said.
“It (the carve-up) is something that he relies on to say that ‘We should have got more revenue from the commonwealth’, but never does he admit that we are receiving record revenues (elsewhere).”
NSW will receive only 86.7c in the dollar from GST revenue per person in 2024-25, compared with 92.4c in the dollar in 2023-24, a 6 per cent decline and a record reduction.
The Treasurer has said it would cost NSW $11.9bn over the next four years.
The state’s wage bill for next financial year has been revised up by $1.8bn since December, coming in at $47.8bn by 2024-25 due to higher insurance costs and hiring more frontline workers.
It is expected to grow at 3.2 per cent a year, up to $52.4bn in 2027-28.
Adding superannuation, employee expenses will come to $58.8bn by June 2028, amounting to 45.5 per cent of all government spending.
Returning to surplus by cutting the government’s wage bill, the Treasurer said, would require firing about 20,000 public sector workers and implementing a “complete wage freeze” next financial year, “significantly impacting” service levels.
Taxation revenue over the forecast period has been revised up by $9.6bn since the half-yearly review, helped by a further $5.6bn in land tax revenue. A freeze of that tax’s threshold at 2024 levels raises about $1.5bn.
Stamp duty receipts have been revised up by $4.1bn since the half-yearly review, and it gives the government almost $11bn more over the next four years than was previously forecast, equating almost to the $11.9bn the state is losing over the same period as a result of the GST carve-up.
“In respect to the revenue growth … we now have to use that to plug the GST (hole),” Mr Mookhey said.
He added that forecasting methods to estimate NSW’s projection of the share remained “best practice”.
The freezing of the tax-free threshold would affect 30,000 of the state’s 180,000 land taxpayers, who would be able to claim some of that back from the federal government.
Urban Taskforce acting CEO Stephen Fenn said the property tax changes could “harm the goose that lays the golden eggs”.
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