How the NSW state budget will impact you

By Dr. John Humphreys, ATA Board Member

The NSW budget echoes the mistakes of the federal and Victorian budgets with reckless spending and unnecessary deficits for years into the future.

* The improvement in the economy would have significantly improved the budget balance if the government had simply been able to stop their addiction to new spending projects. The natural improvement would have seen the deficit shrink to $3 billion in 2021/22, and then return to surplus in 2022/23, which would have been an appropriate outcome given the circumstances. This was a massive lost opportunity.

* Unfortunately, the government has continued to use COVID as an excuse to embark on an unprecedented spending spree, leading to an eye-watering deficit of $8.6 billion in 2021/22, and then continued unnecessary deficits in 2022/23 and 2023/24.

* Over 90% of the new budget spending was unrelated to the pandemic.

* There is little to say about tax policy. The government will cut stamp duties on electric vehicles, but this small tax cut is more than offset with several other small tax increases. Perhaps the best news is that the government has resisted the urge to follow Victoria's example by introducing a series of large tax increases.

* Another small step forward in the budget is the partial deregulation of the taxi industry. Most of the credit for this change should go to Uber and other ride-share apps, and the deregulation should have happened decades ago, but better late than never.

* State net debt is projected to increase substantially, from $19 billion up to $104 billion over five years. The government correctly claims that this will be manageable if they can get the budget back under control and interest rates stay low, but those are both dangerous assumptions.