New report released on state of the NSW finances in 2008-09
NSW Business Chamber has welcomed the release of the Report on State Finances saying it represented a better than expected outcome for NSW following the global financial crisis.
“NSW has held up better than we all expected. Employment has been steady for a number of months and the reduction in the 2008-09 Budget deficit to $897 million from $1.337 billion in June is a welcome outcome,” said Stephen Cartwright, CEO of NSW Business Chamber.
“It is not often I welcome an increase in tax revenues – but in these circumstances it is actually a result of stronger than expected economic activity.
“Payroll tax revenue has held up in NSW which reflects the fact that employers have held on to staff, albeit in some cases with reduced hours, rather than lay people off.
“However, there are warning signs in terms of the long term position of the Budget. The fact that Government employee expenses grew by 7.8% in a single year is a concern. Public sector wages at $25.8 billion now accounts for over 51% of all expenses. This is a reminder of the need for the Government to find efficiencies within the public sector and to improve work practices."
Cartwright said the result also highlighted the need for reforming the GST funding agreement.
“In 2008-09 NSW collected $13.5 billion in GST revenues and was reimbursed $11.8 billion in GST revenues. This means that in 2008-09 the NSW GST subsidy to other States was $1.6 billion. Federal Government plans to change the GST formula going forward could see the State lose almost $2 billion over the next three years”.
Cartwright said whilst the increase in the net financial liabilities was a concern, such a deterioration is a natural outcome of a sudden deterioration in economic conditions.
“This blowout of debt takes NSW back to where it was at the start of the Carr years. This is a salient reminder that, going forward, NSW will have to seek greater private sector involvement in the provision of infrastructure and services and that the State Government has to work harder in keeping costs under control.
“A significant part of the blowout in liabilities does relate to superannuation liabilities ($31 billion at June 30 2009 compared to $17.8 billion at June 30 2008) and whilst this reflects the deterioration in the financial markets, it does highlight the significance of this liability in the medium to long term."
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