The great irony of this unashamedly Labor budget is that the property boom,which has turned Sydney into a misery for so many prospective home buyers and renters,is pouring vast amounts of cash into government coffers. Indeed,the bulk of the $10.7 billion in additional revenue expected over the next four years comes courtesy of a higher haul in transfer duty and land tax worth a combined $7.9 billion,mostly from the sale of properties over $1 million. Mookhey and NSW Premier Chris Minns are cursed by Sydney’s absurd property market yet blessed by it.
While the picture is rosier than the past rhetoric,it is still important to understand the backdrop against which this budget is being delivered.
NSW claims it has $11.9 billion less to play with over the next four years due to an unfair GST carve-up by the Commonwealth Grants Commission. To make matters worse,interest repayments remain high,and the government has also taken a hit to the bottom line due to the need to revalue assets and estimate the replacement cost at a time of high inflation.
Is it unusual for a government to face challenges as they put together a budget? Of course not. Every administration of all political persuasions makes the same argument. But some of the challenges confronting NSW – particularly servicing our COVID-induced debt burden and the likelihood of declining GST revenues – are real.
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The $11.9 billion GST “rip-off” repeatedly cited by Mookhey is disputed because it is based largely on forecasts rather than “real” money. Mookhey’s problem here must be frustrating because putting together a state budget requires four-year projections for revenue. However,the Commonwealth only offers projections on GST distributions on a 12-monthly basis. The state has to forecast something,so has used the hopeful but probably fallacious assumption that the Commonwealth Grants Commission would split GST money in a favourable way to NSW.
NSW has therefore calculated what it was expecting to get versus what it is now likely to get based on this year’s lower distribution. Are the assumptions generous to NSW? Probably. But either way,the reality is NSW will receive less in GST than it deserves,or the government had expected.
That said,by the treasurer’s own concession the GST blow is not as severe as it could have been thanks to the property boom,a slowing of interest repayment growth,and a reorganisation of state investment funds which is expected to deliver a larger return of about $1.6 billion which can then be spent on basic government services.