NSW budget: growth surge pinned on population, investment

Surging population growth and rising business investment are underpinning an economic boom in NSW.

The budget papers predict the unemployment rate will fall to 4.75 per cent for the next few years from 4.9 per cent last month.

Surging population growth and rising business investment are underpinning an economic boom in NSW, helping insulate the government from a slowdown in housing.

The nation’s biggest state economy is expected to grow by 3 per cent in each of the next two years, down from 3.75 per cent this year, owing to a continuation of 1.6 per cent annual population growth, according to the budget papers.

“NSW is in the midst of an economic boom, the likes of which we have not seen in decades,” Treasurer Dominic Perrottet said.

Pencilling in a fall in the unemployment rate to 4.75 per cent for the next few years from 4.9 per cent last month, the budget papers say: ­“Demand for labour has been supported by strong economic ­activity and modest wages growth.”

Noting the state’s population was set to surpass eight million over the next 12 months, the papers add: “Historically high levels of net migration to Australia, combined with the relative strength of the NSW labour market, have ­lifted the state’s net overseas ­migration to the highest on record, just under 100,000 in 2016-17.

“The contribution of inter­national students to the state economy is significant, $11.3bn in the 2017, which is $4bn more than the entire tourism industry.”

In regional areas the jobless rate has fallen from 7.3 per cent to 5.7 per cent, 0.6 percentage points below the long-term average.

“The public sector is expected to remain a key source of strength, underpinned by the state’s record $87.2bn four-year capital program and the expansion of the NDIS,” the budget papers say.

The government said business investment would make a bigger contribution to the state’s growth, noting public engineering work now made up almost half the ­national pipeline of public engineering projects.

The government expects the consumer price index for Sydney to rise to 2.25 per cent for each of the next two financial years, a little higher than the Reserve Bank expects for the whole of the country.

Meanwhile, wage growth is ­expected to rise from 2 per cent this year (a more conservative estimate than the federal government’s forecast of 2.75 per cent) to 2.5 next year, before reaching 3 per cent in 2021.

“We’re the party of the workers,” the Treasurer said yesterday after delivering his second budget. “NSW today boasts the lowest ­unemployment rate of any state for three years running. In western Sydney it’s below 5 per cent, for the first time since records began.”

The budget papers say: “While conditions in the housing market continue to soften, the overall economic outlook remains favourable.”

The torrent of stamp duty revenues has started to dry up, dropping to $8.6bn this year from $9.7bn a year ago as the volume of transactions drops from 210,000 in 2017 to 183,000 this year.

“The current housing construction boom is forecast to push housing completions to record levels and halve the estimated housing undersupply over the next few years.”