NSW tax reform likely as post-pandemic state looks to future

NSW Treasurer Dominic Perrottet will formally outline a grim snapshot of unemployment, revenue impacts and other measures caused by the pandemic.

NSW Treasurer Dominic Perrottet. Picture: AAP

The NSW construction industry has been brought to its knees, the NSW Treasurer will report on Tuesday, pointing to sector-wide cancellations of housing projects and lower demand because of falling immigration.

In delivering his economic update to the NSW parliament, Dom­inic Perrottet will formally outline a grim snapshot of unemployment, revenue impacts and other measures caused by the once-in-100 years pandemic event. The forecasts, some of which have been selectively released, suggest a bleak future for the state in the near term, not least in the building industry.

Figures to be released by the Treasurer will show nearly 48,000 organisations have submitted JobKeeper applications across NSW, comprising about 15 per cent of all 310,830 applications.

Mr Perrottet is expected to say unemployment could reach 7.75 per cent in the June quarter, about 275,000 fewer people in employment. A combination of drought, bushfires and the unprecedented effects of the pandemic will likely cause the economy to contract by about 10 per cent.

Tuesday was supposed to be the day Mr Perrottet handed down the state’s 2020 budget, his fourth since taking the role in 2017. Instead, that budget has been put on hold until at least October and replaced with nightmarish unemployment numbers and declines in productivity.

Revenue is forecast to drop by up to $20.3bn by 2023-24 as a result of reduced payrolls and payroll taxes. Mr Perrottet will point to reductions in consumption and business spending, which will impact the state’s GST revenue pool, along with a loss of confidence in the property market, the effect of which will translate to lower transfer duties and land taxes.

The Treasurer also appears hopeful of sketching out a silver lining, according to prepared marks he will deliver, which were provided to The Australian. He is expected to announce the government has officially pivoted the state from a “response” footing to one of “recovery and reform”.

This will namely concern the way taxes are collected and distributed by the commonwealth, but it will also expend energy on revitalising bruised sectors of the economy, including tourism, hospitality and accommodation.

Mr Perrottet has long railed against what he calls inequities and inefficiencies in tax collection, and has previously earmarked tax reform as a means of bootstrapping the economy. Next month, the findings of a review he commissioned into the state of these federal financial relations will be released. It is likely certain taxes, such as stamp duty, will be abolished because of their perceived volatility. The recommendations are likely to include a flat land tax to be used as its replacement.

“With constrained fiscal cap­acity and new challenges for businesses and employees ahead, like the winding back of JobKeeper, now is not the time for reckless spending,” Mr Perrottet’s prepared remarks say.

“But it is not the time for austerity either. We have one goal above all: to create jobs to get NSW working again.”

Mr Perrottet said 2020 should not be written off as a year blighted by back-to-back disasters.

“The political unity across all states gives us a unique platform for real reform and to change our economy for the better,” he said.