The Commonwealth injection is keeping NSW afloat, but doesn’t hide leaks, that’s the key message from Mark Goodsell, Ai Group’s NSW Director, on this week’s NSW budget.
“While the economic downturn has played its inevitable part in the New South Wales Budget slipping into deficit by reducing tax revenue, an escalating wages bill, which is largely of the Government’s own making, compounds the fiscal shortfall,” Goodsell said.
“Despite a significant inflow of grants from the Commonwealth, the Budget reveals an adverse $1.6 billion turnaround in the State’s bottom line with a 2008-09 deficit of over $1.3 billion replacing the surplus of almost $300 million anticipated in the 2008-09 Budget.
“The drop in taxation revenue in 2008-09 of $800 million accounts for half of the deterioration in the budget bottom line with most of the remainder due to employee costs exceeding budget by in excess of 2.5%.
“Business welcomes but has every right to be cautious about the Better Services and Value Plan — the new initiative to strengthen NSW public finances.
“The plan involves another review of public expenditure, a strategic review of state-owned enterprises and rationalisation of major spending areas such as IT and legal services,” Goodsell said.
“There is very little detail about how the Better Services and Value Plan will be different from previous attempts to make the NSW public sector more efficient.
“The long-term success or otherwise of the Government’s budgetary strategy will depend very much on the outcome of this initiative. Ai Group will support an innovative, effective and transparent approach to lift the value we get from taxpayer’s funds.
“Business welcomes the strengthened spend on the State’s infrastructure although the Commonwealth is providing most of the extra funds. This will improve efficiency and amenity in the State over the longer term while providing a much-needed boost to business activity in the short-term,” he said.
“The ongoing though moderate relief from payroll tax is also welcome. However, the lack of action on other business costs including workers compensation premiums was disappointing.
“The key red tape issue for business in NSW remains Occupational Health and Safety. We applaud the commitment to implement harmonised safety laws under the May 2009 agreement with the Commonwealth and the other states.
“There are a number of valuable measures in the Budget supporting the need to promote apprenticeships and traineeships during the downturn.
“Increased funding for State and Regional Development, including regional and small business programs, are welcome measures that increase the level of the State’s commitment to economic development and help support companies in stressed economic times.
“The new procurement policy is part of a positive focus on how Government procures its goods and services. Ai Group supports the Government’s view that local businesses should be “able to fairly and reasonably compete to provide the goods and services required by agencies”. We also support the concentration on value for money in purchasing decisions but are very wary of measures that could add to the cost of government and ultimately hurt rather than help businesses paying tax in NSW.
“Ai Group has long encouraged Government to actively seek out and utilise the capabilities of competitive local industry. In this context we welcome the extra funding for the Industry Capability Network,” Goodsell said.