NSW Treasurer Hon. Dominic Perrottet talks the State's mid-year review and why the 2017-18 budget is its strongest in years.
Jessica Amir: Hi I’m Jessica Amir for the Finance News Network with the New South Wales Treasurer, Honourable Dominic Perrottet. Thanks so much for having us in your office.
Dominic Perrottet: A pleasure Jessica.
Jessica Amir: First up, you’ve just announced a massive $3.3 billion surplus, beating expectations and the four-year average. Can you just unravel the details and what really led to that?
Dominic Perrottet: We announced a $2.7 billion projected surplus in the Budget this year, I mean that’s increased up to $3.3 billion. And a lot of that has been the fiscal discipline behind the scenes from the Government, but also higher than expected payroll tax coming through, as we’ve seen a greater improvement in fulltime workforce here in New South Wales. We’ve seen a slight moderation in transfer duty. But I guess what’s been at the heart of the success for us here in New South Wales, is making better use of what we have. And from an asset recycling perspective, that’s really been what I call, a secret source of our success here. And that’s resulted in a strong position, where we’re getting rid of old assets and putting them into new assets, which has obviously assisted in the strength of the New South Wales Budget position.
Jessica Amir: Speaking about the Budget position, what’s the State doing to ensure surpluses continue in the future?
Dominic Perrottet: One of the key factors here in New South Wales has been the fact that we try and in law the Fiscal Responsibility Act. And as part of that, we’ve got to keep our expenses below long-term revenue growth and that’s at 5.6 per cent.
And you’ll see other States around the country have a similar Act, but no real definition behind it. So that makes sure that regardless of however the revenues are running, our expenses run under control. You’ve got places like Western Australia, when the mining boom was running red-hot and the revenues were high, so were their expenses. So we keep that fiscal discipline behind the scenes, because we know that if there is any softening down the track, we’re going to make sure that New South Wales is well positioned for any of those changes.
Jessica Amir: You mentioned in your half yearly update tax revenue’s on a downward trend, with really first homebuyers taking advantage of your offsets. So what’s the outlook now going forward?
Dominic Perrottet: In the most recent Budget, we brought in tax cuts for first homebuyers for new homes, up to $650,000 and concessions up to $800,000. And we’ve seen a real impact there and an above trend take-up.
So in the same time last year, we had about 3,000 new homeowners accessing our concessions, that’s up to $13,000 the same period. And pre-July 1 this year, we had about five per cent of purchases being made by first homeowners and that has tripled now, to 15 per cent. So, we’re seeing first homebuyers are coming back into the market, it’s obviously a very positive thing.
As a Treasurer I’m happy to lose a little bit of revenue, if that meansthat we’re getting first homeowners back into the market. But above all in terms of the housing market, we’re seeing from our projections in the last Budget, that it would increase the decreasing rate from about 5.9 per cent, down to 5.4 per cent. At this half-yearly update, we’re seeing things generally in line with that.
What we’re seeing over the last 12 months is over 70,000 new approvals, on the residential construction side. That is a record here in New South Wales and that will now translate into completions in constructions. There’s no doubt here in New South Wales that whilst our economy’s going well, construction is king. It is at the forefront of everythingthat’s happening across New South Wales, and we see that residential construction continuing now and into the future.
Jessica Amir: Now to your record spending on infrastructure, over $80 billion. Just give us a breakdown Dominic on where that’s going per city and region?
Dominic Perrottet: Over $80 billion infrastructure spend is more than the Canadian Government’s infrastructure spend. So never before have we seen infrastructure being built like we are today. The IMF recently came out and said there’s one thing that governments can do to boost their economic growth, it’s get involved in the production of public infrastructure. So here in New South Wales, I don’t think you’ll find another State that’s achieving the infrastructure growth that we are here, and more cranes over the skies than almost anywhere else in the world, just outside Dubai.
And from a city regional perspective, we have a fund called Restart New South Wales, just over $30 billion in that fund. And 30 per cent of that fund is invested in regional New South Wales. But importantly, it’s the infrastructure that drives economic growth but provides the support that our citizens need, in regional New South Wales. And one of the great aspects of the Budget was going out to regional communities, and whether it was delivering a new hospital in Tweed for $0.5 billion, when they just simply requested $50 million for an upgrade, we are really seeing the benefits of the infrastructure investment we’re making.
So whether that’s in health and education, $7.7 billion in health funding, $4.2 billion on the education side, at the same time everywhere you look in metropolitan Sydney as well, you would just see construction activity. That brings inconvenience, but we know that really New South Wales is changing for the first time in a long time. And when this construction is finished, we’re going to have the best city in the world.
Jessica Amir: You’ve mentioned quite a lot of other highlights from your half-year review. But is there anything else that you wanted to hone in on?
Dominic Perrottet:We’re the only State with a four in front of our unemployment, a rate of 4.6 per cent. The next closest State is Victoria at 5.7 per cent. Our jobs growth, we committed to providing about 150,000 jobs in the 2015 election. We’ve already exceeded that, well over 200,000 jobs. Importantly though, those jobs that are being created are fulltime jobs, about 80 per cent of our jobs in fulltime employment. And that compares to around 42 per cent in fulltime employment around the rest of the country.
But also hitting $80 billion in infrastructure when you see as well that the economic growth in this country, almost half of that growth, is coming straight out of New South Wales. It shows you really that we are the engine room of the national economy.
Jessica Amir: Just yesterday the Federal Treasurer announced that economic growth has been downgraded somewhat, but New South Wales is really outpacing the nation, contributing the bulk of growth to the national economy. What can we expect over the next two years and beyond Dominic?
Dominic Perrottet: The economic growth here in New South Wales has certainly been the major contributor to economic growth across the country. We’re almost twice that rate, so at 2.9 per cent compared to about 1.4 per cent from a Commonwealth perspective.
We would see our economic growth continuing up to about three per cent, and falling back to about 2.5 per cent by 2021, which is about trend. What we’re doing in New South Wales though, we obviously have a very strong diversified economy. But with our public investment in infrastructure, that adds about half of a percentage point to our economic growth, across the board.
So we believe that we’re in a very strong position here in New South Wales. We continue to probably lead the way and we’ll continue to see that.
We will see some of the other States obviously as the mining boom has fallen away, they will continue now to increase their economic output and that’s obviously a great thing for the country. But here in New South Wales right now with the significant construction, a diversified economy particularly, I mean if you look at the service industry, tourism, education, health services, we will continue to power ahead. And that’s a great thing for the people of New South Wales.
Jessica Amir: Dominic Perrottet, it was a privilege and an honour, thank you so much for having us.
Dominic Perrottet: Thanks Jessica.