NSW Treasurer Matt Kean has announced a deficit of $16.6 billion for the current year, reducing to $11.3 billion next financial year, with a return to surplus expected in 2024-25.
Handing down his first budget as Treasurer, Matt Kean said the big policy spending items are a "once-in-a-generation reform budget for the people of NSW" that aims to plan for the next decade.
"This budget is about reform. Reform to give our children the best start to life, reform to make owning your own home easier to achieve and reform to break the barriers to women's opportunity in this state," he said.
"We're betting on our kids, because we know investing in our kids and giving them a great education is what sets them up for a great life.
"These are investments that will deliver for families today that will also build a brighter, stronger, prosperous tomorrow."
NSW is projected to return to surplus in 2024-25 – the same year as forecast in last year’s Budget, despite the Delta and Omicron outbreaks and floods – and that surplus is projected to increase to $1.4 billion in 2025-26.
The surplus would be achieved through budget improvement measures over the next four years, including increases in taxes on foreign investors and gambling.
Revenue is expected to increase on the back of projected rises in GST revenue, mineral royalties, payroll, and land taxes. Temporary payroll tax relief for businesses, in place throughout the coronavirus pandemic, will end and return to 5.45%.
“The government is confident the Budget can return to surplus by 24-25 but that will take solid financial management considering the debt levels and the vast spending measures detailed in this Budget,” Business NSW chief executive Daniel Hunter said.
“Businesses are expected to contribute more than their fair share, with payroll tax receipts expected to reach almost $12.8 billion annually by the end of the forward estimates, overtaking stamp duty as the government’s largest source of revenue.
“While we have been great supporters of the government’s payroll tax reform and relief during COVID, our members will be challenged when the payroll tax rate increases from 4.85% to the pre-pandemic level of 5.45% from 1 July, with an estimated additional $2.3 billion to be collected from businesses over the forward estimates. This pressure adds to the rising inflation and energy costs and labour shortages faced by business."
Tax partner at BDO, Fady Abi Abdallah, said that the Perrottet government was aiming to get back to surplus by leaning on increased payroll tax receipts.
“It is back to normal for businesses who pay payroll tax with the NSW government announcing the temporary reduction in payroll tax will not continue,” said Mr Abi Abdallah.
“Businesses will now have to juggle increased payroll tax payments along with rising interest rates and inflationary pressures.”
Significant new spending
ANZ economist Madeline Dunk said the state government had delivered a future-focused “reform” budget that includes significant new spending.
“The government’s mindset appears in line with the Half-Yearly Review, when the state’s Treasurer claimed it was the time for ‘prosperity not austerity’,” she said.
The NSW Budget has placed a generational emphasis on boosting skills, workforce participation and educational and business opportunities targeted through a new Women’s Opportunity Statement with benefits across the entire NSW economy.
The NSW government allocated $16.5 billion over 10 years to programs that will benefit women which also include improving the experiences of women in the workforce and supporting women in small business and entrepreneurship.
To address the growing skill shortages crisis, the NSW government has also invested a record $2.8 billion recurrent in skills and training through the 2022-23 NSW Budget.
As part of the landmark investment, the NSW government is delivering a record $2.0 billion recurrent investment in TAFE NSW and will invest $82.7 million over four years to deliver fee-free apprenticeships along with providing $25.1 million for the statewide expansion of Careers NSW.
Mr Hunter said these initiatives would result in increased workforce participation, which is a key strategy to address skills shortages, by particularly encouraging more women back into work.
“We know that as a result of closed borders and a lack of international students, the skills gap is widening, and an investment of more than $80 million over the next four years to create 70,000 fee-free places in training courses will help to turbo charge the recovery,” he said.
Services to support small businesses will also receive a cash injection in the 2022-23 NSW Budget.
Minister for Small Business Eleni Petinos said as a key provider of goods, services, and jobs, small business was at the heart of local communities.
“The number of small businesses in NSW grew by four percent last year to almost 800,000 and about 98 percent of all businesses in NSW, so it is critical to the economy and our communities that they have strong support,” Ms Petinos said.
The NSW Small Business Commission will receive $9.5 million over the forward estimates to boost mediation and support services for small businesses. The additional recurrent funding would provide ongoing support for small businesses as they recover from COVID-19.
Future Economy Fund
Meanwhile, businesses in "future industries" will be offered grants and payroll tax exemptions through the Future Economy Fund until July 2027.
The NSW Government will commit $703.4 million in the 2022-23 NSW Budget to deliver the State’s first fund aimed at the full life cycle of innovative, high-growth businesses in priority sectors and drive productivity in emerging high-value industries, such as digital technology, medical technology, and the clean economy.
The fund will allow the NSW Government to respond quickly, capturing competitive investment attraction opportunities to secure companies to relocate to New South Wales or support local businesses to grow.
Mr Hunter said business owners across the State would be encouraged by the establishment of the Future Economy Fund.
"It will provide direct funding to drive research and development, assist in the commercialisation of products and accelerate investment in priority sectors," he said.