Government wears deficit for NSW businesses

Key points of the NSW state budget 20011/2012 are:

  • $8 billion in savings across four years
  • Increase in mining royalties to offset carbon tax
  • Small increase in annual household power bills to cover cost of the solar bonus scheme
  • 5000 public sector jobs to go under a program of voluntary redundancies
  • First-home buyer stamp duty exemption restricted to newly constructed homes
  • Budget into deficit in 2011-12 but returns to surplus until 2014-15


The NSW 20011/2012 budget, released yesterday, confirmed a deficit of $718 million in 2011-12 and a plan for $8 billion of savings over the forward estimates.

Australian Industry Group commended the government on the budget deficit and the proposed return to surplus stating that it was a considered move for the government to wear a deficit, rather than hit businesses with increased taxes.

"They’ve sent us a message that they’re prepared to wear in a short term a deficit and increased debt within a framework that still sees them fiscally responsible over the next three to four years," NSW AIG director Mark Goodsell said.

However the Greens warned that a return to surplus after a year could be too soon and could deprive the state of infrastructure investment. Greens MP John Kaye said it would leave NSW more exposed to global economic uncertainty.

While the 20011/2012 NSW budget signifies no major change for the state’s manufacturing industry compared with the Federal Governments’ carbon tax, manufacturing businesses in NSW will still have to content with issues of skill shortages, a high Australian and  falling domestic local demand.

"The size of this deficit and debt is also less of a concern provided the outcome is to increase the productive capacity of the State and the efficiency of the Government’s own economic effort,” Goodsell said.

The budget also outlined investments in transport and regional infrastructure, including plans to lease Sydney’s Port Botany freight terminal to a private operator under a long-term contract of 99 years.

The Government estimates the lease deal to raise up to $2.2 billion up front; money which will be reinvested into transport and regional infrastructure projects in areas such as the Hunter region.

“The focus on the Hunter region is particularly welcome but contrasts with a gap in planning for much needed improved transport links with the Illawarra to help its growth prospects,” Goodsell said.

“High quality infrastructure supports industry growth and creates the potential for substantial flow-on effects for businesses in the State’s manufacturing, services and construction sectors.

"It will be important for the Government to ensure that the opportunities for competitive local content are maximised. We will be pressing for this focus to be applied in the roll-out of these major capital works.”

Goodsell said the NSW Government can also directly help local companies though competitive levels of taxation and by productivity enhancing measures.

“While the payroll tax rebate initiative provides relief in the hiring of new workers, more needs to be done to help businesses under pressure in this State.  Payroll tax in NSW remains uncompetitive,” he said.

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