The New South Wales 2015-16 budget announced this week demonstrates the O’Farrell/Baird governments have accomplished the budget repair mission that so eludes their federal colleagues.
They have done so through a combination of good management (curbing the growth of recurrent spending) and good luck (much stronger revenue than expected). Recurrent spending growth has been held down to the rate of inflation and population growth. While hardly a picture of austerity, this is more disciplined than the previous government’s approach.
As for the good luck, revenue from real estate turnover this financial year is running at $2 billion a year (almost 40%) above the level expected three years ago — just before the Sydney boom began — and total revenue is $4 billion above. This has enabled the budget to return to an operating surplus.
To its credit, the government is not using its strengthened finances as a platform to ramp up recurrent spending. But neither is it using it to lower taxes and in particular reduce dependence on the volatile and distorting stamp duty on real estate, which is now as big as payroll tax. This reluctance stands in contrast to the South Australian government’s recent bold initiative to phase out stamp duty on all business transactions.
The Baird government’s reluctance to cut taxes is partly due to caution about the durability of strong revenue flows, but also to a deliberate choice to marshal resources from the budget and privatisations to ramp up capital (‘infrastructure’) spending in the years ahead without unduly increasing debt.
In the meantime, rather than taking unilateral action on tax reform, Baird is looking to the Abbott government’s tax and federation white paper processes to generate the state tax reforms that are so badly needed. Time will determine the wisdom of this choice.
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Baird’s budget bonanza
They have done so through a combination of good management (curbing the growth of recurrent spending) and good luck (much stronger revenue than expected). Recurrent spending growth has been held down to the rate of inflation and population growth. While hardly a picture of austerity, this is more disciplined than the previous government’s approach.
As for the good luck, revenue from real estate turnover this financial year is running at $2 billion a year (almost 40%) above the level expected three years ago — just before the Sydney boom began — and total revenue is $4 billion above. This has enabled the budget to return to an operating surplus.
To its credit, the government is not using its strengthened finances as a platform to ramp up recurrent spending. But neither is it using it to lower taxes and in particular reduce dependence on the volatile and distorting stamp duty on real estate, which is now as big as payroll tax. This reluctance stands in contrast to the South Australian government’s recent bold initiative to phase out stamp duty on all business transactions.
The Baird government’s reluctance to cut taxes is partly due to caution about the durability of strong revenue flows, but also to a deliberate choice to marshal resources from the budget and privatisations to ramp up capital (‘infrastructure’) spending in the years ahead without unduly increasing debt.
In the meantime, rather than taking unilateral action on tax reform, Baird is looking to the Abbott government’s tax and federation white paper processes to generate the state tax reforms that are so badly needed. Time will determine the wisdom of this choice.
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