Budget delivers better services, investment in infrastructure and tax cuts
3 June 2008
NSW Treasurer Michael Costa today said the 2008-09 Budget delivers record spending in services and infrastructure, $3.6 billion in tax cuts and the 13th consecutive Budget surplus.
"The 2008-09 Budget provides a boost for business with significant tax relief, while further record investment in services and infrastructure will help meet the challenges of a growing and ageing population," Mr Costa said.
"The Budget contains record spending on services of $47.6 billion, including targeting the Premier's priority areas of Aboriginal health, emergency departments, child protection, mental health and disability services."
Mr Costa said strong financial management meant the Government was able to keep the Budget in the black even with challenging economic conditions ahead.
"The 2008-09 Budget is expected to be a surplus of $268 million, with surpluses averaging $800 million in the following three years.
"Under the accounting standards* that applied until last year the 2008-09 surplus would have been $737 million."
The revised result for 2007-08 is a surplus of $700 million (or $1 billion under the previous accounting standards), an improvement of $660 million since last year's Budget.
Mr Costa said record spending in 2008-09 would deliver better services in front line agencies, including:
• Health - $13.2 billion;
• Education - $11 billion;
• Police - $2.4 billion;
• Ageing and Disability Services - $2 billion;
• Community Services - $1.35 billion million;
• Environment - $986 million; and
• Emergency Services - $815 million.
Total spending in Transport is $5.9 billion.
Mr Costa said the better than expected Budget surplus in 2007-08 is in addition to the early repayment of $390 million in debt accrued from the Epping to Chatswood Rail Line project.
"Last financial year we paid off $960 million of debt associated with this project, and by the middle of next year the Epping to Chatswood Rail Line will be debt free," Mr Costa said.
Mr Costa said the Government was also taking a responsible approach to public sector wages by limiting the impact on the Budget to the Reserve Bank's mid-point inflation target of 2.5 per cent.
"In the last 12 months wage rises for public service employees have been as high as 5 per cent because of productivity offsets, but the net cost to taxpayers has been 2.5 per cent," Mr Costa said.
"So far the Iemma Government has negotiated 11 such pay deals with public sector unions.
"This is not only fiscally responsible, it's essential the Government play its part in the fight against inflation and higher interest rates."
Mr Costa said the NSW economy had grown strongly in 2007-08, but growth was expected to ease back somewhat in 2008-09 under the weight of higher interest rates, tighter credit markets and uncertain international economic conditions.
"In 2007-08 state final demand is estimated to have grown by a very strong 4¼ cent, gross state product by 2½ per cent and employment by 2½ per cent, while unemployment dropped to a generational low of 4½ per cent," Mr Costa said.
"In 2008-09 growth in state final demand is expected to slow to 2½ per cent, GSP to 2 per cent, and employment to 1 per cent.
"Unemployment is expected to rise slightly to 4¾ per cent, but remain well below historic levels, while inflation is expected to ease back."
Mr Costa said the increase in capital expenditure, new tax cuts, changes to accounting standards and the recent downturn in capital markets meant the Government would not meet some of its fiscal targets.
"Net general government debt will increase from 1.4 per cent of Gross State Product in June 2008 to 1.7 per cent of GSP in June 2012.
"But debt levels will stay significantly lower than 1995 when it was 7.4 per cent of GSP."
As has been the case with past major transactions, estimates of the proceeds of electricity sector transactions have not been included in the Budget, with the impact on the balance sheet and on fiscal targets to be shown in future years.
* Footnote
* The application of a new accounting standard means that a 2006 Commonwealth roads grant of $960 million must be recognised as revenue in 2005-06. This has the effect of lowering the result across the following four years.
