NSW budget: spending triggers a leap into the red

The NSW government’s debt is poised to explode as it rolls out an unprecedented capital works program.

NSW Treasurer Dominic Perrottet in Sydney yesterday. Picture: Richard Dobson.

The NSW government’s debt is poised to explode as it rolls out an unprecedented capital works program, mainly on new and updated transport facilities.

Net debt, which subtracts cash and investments from the government’s outstanding loans, will soar from $9.8 billion in the black this month to a forecast net debt of $28.7bn by June 2022, equivalent to 4 per cent of the state’s output; the highest level since 1999.

“Today we announce our infrastructure investment hits another record — $87.2bn over the next four years, the largest in the ­nation,” Treasurer Dominic Perrottet said yesterday, announcing $440 million to build connections to the planned Western Sydney Airport.

Since the Coalition was elected in 2011, spending on capital works has grown from the equivalent of less than 1.5 per cent of state output — less than the average of other states — to 2.5 per cent, far more than the average.

“The historic infrastructure pipeline would not have been possible without the government’s asset recycling program, which freed capital from ‘poles and wires’ to invest in schools, hospitals, roads and rail,” the budget papers say. Without the sale of other ­assets, such as the lands and titles office, net debt would, on current forecasts, be $52.7bn in 2022.

The budget will record a surplus of between $1.4bn and $1.9bn over the next few years.

Governments keep a number of measures of financial health. In 2004 treasurer Michael Egan shifted the budget’s focus to the “net operating balance”, which ­includes only recurrent expenses, from the more stringent “net lending/borrowing requirement”, which includes all incomings and outgoings.

On that latter measure, the budget deficit will continue to rise within a range of between $5.1bn and $10.3bn a year over the next four years.

NSW will spend $17.3bn in each of the next two years on capital works, up 41 per cent from this ­financial year, the result of the new Sydney Metro West rail line and the F6 Highway extension ­between Kogarah and Arncliffe. “The state is to receive $4.2bn from the divestment of its share in Snowy Hydro to the commonwealth government, which has largely offset increased infrastructure spending in 2017-18,” the budget papers say.

Education and health combined make up more than 50 per cent of the government’s recurrent expenditure, while transport makes up 57 per cent of the capital works spending.

Growth in wages and superannuation, which make up 45 per cent of state government expenses, are set to fall to 1 per cent next ­financial year, the lowest growth since 2003.