- COVID-19 has ushered in many unprecedent situations for the state of NSW with Treasurer Dominic Perrottet declaring a A$16 billion deficit in yesterday’s budget speech.
- As part of economic recovery, the Morrison government had already implemented a tax reform, cutting taxes for NSW residents.
- However, tax cuts are expected to cost the state A$22 billion over the next four years.
- In the budget speech, Mr Perrottet mentioned exact numbers for grants that will be given out for particular departments, such as health, childcare, education, first home buyers, and others.
NSW Treasurer Dominic Perrottet has announced the state budget for 2020. As expected, the state has faced a large deficit of A$16 billion due to the COVID-19 pandemic.
The vast debt is currently expected to stay until 2024, despite extreme measures that Mr Perrottet announced on Tuesday, 17 November.
During the toughest restrictions that NSW faced earlier this year, Mr Treasurer estimated a weekly debt of A$1.4 billion. The same period brought a 6.8 per cent reduction in the June quarter for NSW economy, while ~270,000 people lost their jobs.
The current A$16 billion deficit is expected to rise in 2021 as part of the new tax reform which has already come into effect.
Mr Perrottet has pledged A$22 billion of tax cuts in total, as NSW residents have already been enjoying tax cuts for a few weeks now, which are here to stay. Mr Perrottet also promised new infrastructure constructions across the state, which should create more jobs and better transport.
Last but not the least, all adults that reside in NSW will be getting four vouchers worth A$25 each as part of Out and About program. With the newly introduced initiative, Mr Treasurer wants to encourage residents of New South Wales to spend more money towards takeaway food and recreation.
What caused billions of dollars of deficit?
Experts estimate that closed borders and COVID-19 stimulus packages have contributed to the A$16 billion state scarcity. NSW had invested A$29 billion towards maintaining the wellbeing of its residents and businesses– no other state had spent nearly as much as NSW did for the aid stimulus.
Who are the biggest losers in NSW Budget 2020?
NSW economy had undoubtedly faced the worst consequences since the coronavirus pandemic took place. Apart from the current deficit and money spent on many wage subsidies, Mr Perrottet forecast a A$25 billion budget tumble in the next five years.
The most significant explanation for that loss is a huge decline in the Goods and Services Tax (GST). For that reason, the government will be likely to turn to privatisation of state-owned services, such as buses, and similar.
When it comes to money that usually comes from the GST, border closures and reoccurring lockdowns around the country are adding to the problem. Tourists and interstate visitor contribute big time to the GST and as long as the borders remain shut, the GST will not improve.
Over the next four years (to 2023-24), NSW economy is expected to get A$14.8 billion lesser than this year (2019-20).
Due to economic uncertainty and no clear instructions about the future of travelling, GST alone will lose A$3.2 billion in the next financial year, while years that are about to come (to 2023-24) will cost A$8.7 billion in total.
GST contributions do not stem from travelling alone, of course. Australians have not been confident enough to spend a lot of money for recreational expenses (e.g. entertainment, restaurants, takeaway, and other). Hence, the Treasury believes Out and About would boost the confidence back again, slowing helping the economy get back up on its feet.
Ironically enough, Australians working in the public sector lost their 2.5 per cent annual wage raises due to extreme budget costs. The Morrison government decided to temporarily freeze public salary increases because it could bring A$3 billion to NSW economy. However, the public sector had received a 0.3 per cent wage increase for the year after NSW Industrial Relations Commission confronted the government.
Wage freeze was not welcomed by unions, especially after fire workers saw the worst bushfire season in a decade, while doctors and nurses are currently the front-line workers fighting the COVID-19 pandemic.
Who emerged as the winners in NSW Budget 2020?
Even though the pandemic caused many people to lose their jobs, the budget plan is mainly orientated towards new work opportunities.
Currently, there are estimated 300,000 unemployed Australians in NSW alone. However, many of them are still receiving JobSeeker and JobKeeper wage subsidies, which will end in March next year after being expanded for extra six months.
The NSW government will work extremely hard on lowering the unemployment rate, which is currently 7.2 per cent. The rate will probably get higher in December (7.5 per cent), but as more Australians are thought to join the workforce by 2024, the percentage should lower to 5.25 per cent.
With the Jobs Plus program, the government will give away A$250 million to businesses that relocate to NSW. Those enterprises that create at least 30 business opportunities will be awarded with tax relief incentives for a maximum of four years.
Apart from many people joining the workforce in the next four years, first homeowners also will relish government benefits. Namely, the government will offer A$25,000 grants for Australians that are buying their first homes. The grants are expected to add more than A$11 billion by 2024 into the state economy.
Health department has also been a major winner in the COVID-19 recovery response battle. The Morrison government invested A$1.6 billion in the coronavirus-related facilities and services, such as quarantine hotels, clinics specifically designed for the virus treatment, and similar.
Apart from the one-year-old virus, the government put money towards rare disease therapies, as 150 Australians die every year due to unknown diseases.
COVID-19 showed significant pollution reduction and worldwide nations are urged to work on their climate change response. For that reason, NSW will give A$32 million for transitioning to renewable energy sources. By creating almost 10,000 jobs, solar panels and other types of sustainable energy will make electricity prices drastically lower than the current Australian average.
Other beneficial businesses and departments will be related to mental health, childcare, infrastructure, education, building, technology, and business.
Who turned out to be not as lucky in the budget?
As data statistics have shown, women were most likely to lose their jobs due to the pandemic, which has proven to be the reality of 2020. And hence, the government decided to give away A$10 million for all women that have been unemployed for at least a month.
By providing A$5,000 grants to each Australian woman, the Morrison government hopes to put them into new jobs and offer them an opportunity to re- or upskill.
However, the grant may not go down well with the feminists as most other causes got much bigger grants compared to the measly ten million dollars earmarked for women.
Last but not the least, the NSW government has reserved A$80 million for constructing new social housing. Fifty-five per cent of the overall budget will be handed to metropolitan areas, while regional NSW will get lesser grants. Eighty million does not sound nearly as big as the new Victorian project called Big Housing Build that will see the state invest a record A$5.3 billion into putting up modern and affordable housing for the most vulnerable.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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