Tax cuts, food vouchers in virus budget

Luke Costin
·3-min read

Restaurant vouchers, record spending on infrastructure and tax cuts are bricks in the path back to prosperity in NSW Treasurer Dominic Perrottet's pandemic budget.

NSW's six-year streak of budget surpluses officially ended in the year to June 30, with the state reaching $6.9 billion into the red, while the forecast deficit for 2020/21 is $16 billion.

Underlying it all is a $29 billion spend on health and economic support packages to tackle COVID-19.

"This budget is completely appropriate for the time and ensures we get as many people in work as we can," the treasurer told reporters on Tuesday.

"In the good times, we've had strong fiscal management behind the scenes (and) that has our state in a very strong position."

Growing expenses 9.7 cent in 2019/20 and another 11.2 per cent in 2020/21 went against Liberal thinking but this $98 billion budget was not about ideology, Mr Perrottet said.

"It's about doing what's right.

"My complete focus right now is to use every dollar we have to keep people in work."

The NSW economy contracted 1.0 per cent in 2019/20 and will be another 0.75 per cent smaller in 2020/21 before three consecutive years of growth of 2.25 per cent or better.

Unemployment is set to peak in December 2020 at 7.5 per cent before falling to six per cent in 2021/22 and 5.25 in 2023/24.

But, like the rest of the budget forecasts, it depends on a coronavirus vaccine being available to Australians in the second quarter of 2021.

An extra year of hard international borders will further suppress household spending and push unemployment to 6.75 per cent in 2022/23.

COVID-19 measures ($4.2b) and bushfire support ($1.3b) to June 2020 took expenses well over the 5.6 per cent long-term target and another $7.8 billion in COVID-19 support and stimulus packages will keep it there.

The state's net debt bill, which was two per cent of the economy in December 2019, will hit 8.4 per cent in June 2021 before reaching 14.7 per cent in June 2024.

The net debt bill will crack $100 billion about the time of the 2023 election

But Mr Perrottet called for perspective, pointing to Victoria's pre-pandemic net debt rate of 8.5 per cent and NSW being able to issue bonds at 1.1 per cent.

That's left opposition leader Jodi McKay questioning why the government is still keen on privatising its remaining stake in WestConnex and examining the sale of lotteries duties, which puts about $475 million into government coffers every year.

"It makes more sense at this particular point to be borrowing than it does to be selling revenue-generating assets in a weakened market," she told reporters.

"This is not a reformist budget and it's not a budget that is going to secure NSW and help its citizens get jobs in a post-COVID world."

Payroll tax - the state's most lucrative tax stream - will be cut to 4.85 per cent for two years while the tax threshold will be upped to $1.2 billion, saving businesses an average $34,000 annually.

Property stamp duty, which the government may morph into a more efficient land tax in the future, is expected to be $1.2 billion lower than earlier forecast.

A $500 million stimulus package putting four $25 food and entertainment vouchers in the hands of NSW adults will begin in Sydney's CBD next month, ahead of a wider rollout.

Two metro lines costing $19.6 billion and a new $1 billion Bankstown and Lidcombe hospital headline a record $107.1b spend on projects while a new public sector wage policy that caps pay increases at 1.5 per cent is set to save $4.3 billion by June 2024.

The projected deficit is expected to rise to $6.8 billion in 2021/22, $2.1 billion in 2022/23 and $460 million in 2023/24.