NSW state surplus on the slide as spending lifts

A surge in spending, rather than a hole left by the property slump, is the main reason for downgrades to NSW surpluses.

NSW Treasurer Dominic Perrottet in Sydney. Picture: AAP

A surge in NSW government spending, rather than a hole left by the Sydney property slump, is the main reason for downgrades to the state’s forecast surpluses over each of the next four years, budget documents show.

Treasurer Dominic Perrottet, releasing the mid-year NSW budget review yesterday, said budget surpluses would be lower over the next four years than had been ­expected in the June budget. Total stamp duty receipts are forecast to be down $2.5 billion over the period because fewer homes would change hands during the property downturn.

“When you go back two years, you were coming off (auction) clearance rates of 80 per cent, and we’re at 40 per cent,” Mr Perrottet said. “We see the property market coming off a bit more, and then stabilising, and picking up in the future.”

However, total government revenues are actually expected to be higher each year between now and mid-2022, Treasury figures show. A $2.5bn ­reduction in revenue due to lower stamp duty receipts will be offset more than two-fold by a $5.4bn surge in GST, payroll and other taxes.

The data shows government expenditure between now and mid-2022 is forecast to be $4bn higher than had been forecast in June. That figure far outstrips the forecast decline in stamp duty revenue.

Total revenues over the next four years are forecast to be $2.87bn higher than forecast despite the lower stamp duty revenue, but total ­expenses will be $4.04bn higher, meaning the total surplus over the period is expected to be down $1.1bn.

Mr Perrottet predicted house prices across the state would bounce back after a further dip.

He said Treasury had made a “conservative estimate” as part of forecasting stamp duty receipts, which had fallen with the housing downturn.

“We believe that is a conservative estimate, and importantly we factored that in … we believe our forecast is strong,” he said.

NSW was expected to deliver a 2018-19 surplus of $1.1bn, down from the $1.4bn predicted in the June budget.

Projected average surpluses over the next four years are $1.3bn, down from the $1.6bn previously estimated.

Just three months from the NSW election, Mr Perrottet said the state budget remained in ­surplus and would do so indefinitely.

He said the government had invested more on drought relief, extra police officers and other frontline services.

Over the past four years the surplus has fallen from $5bn. “We don’t run surpluses so we can sit there and say there’s a number. We run surpluses so we can invest in what matters to people across the state,” he said.

The Treasurer said the NSW government would increase investment in infrastructure by $2.5bn, taking the total over four years to $89.7bn.

He confirmed that the NSW generations fund, established to retire debt and foster community-led investment, had grown from $3bn to $10bn following the sale of the government’s 51 per cent stake in the Sydney Motorway Corporation in August.

The government remained committed to its asset-recycling program, he said.