Overview
The 2014-15 Budget continues to deliver on the Government’s plan to enhance the living
standards of all New South Wales residents by driving individual opportunity, economic growth,
productivity and employment. This is underpinned by the Government’s economic strategy,
which is delivering a stronger New South Wales economy through investing in infrastructure and
initiatives such as the Jobs Action Plan and Housing Acceleration Fund. The transition in the
national economy from mining-investment led growth to broader based drivers of growth is
already evident in New South Wales, with the State’s economic growth leading the nation.
New South Wales is well placed to benefit from the changing economic environment.
Major new investment in productive infrastructure will grow the economic potential of the State
into the future and additional funding for core services will significantly increase the number of
frontline staff, particularly in hospitals and schools. Important new initiatives directed towards
the most vulnerable members of the community will improve child protection and address
alcohol related violence.
While investing in better economic and social outcomes, the Government continues to maintain
strong fiscal discipline. Improvements in economic conditions are flowing through to an increase
in state revenues. These revenue collections and expenditure restraint are improving budget
results. In addition, combined with the successful asset recycling strategy, net debt levels have
been dramatically reduced from their levels in the 2013-14 Budget, providing the capacity to
accelerate the further investment in major infrastructure needed within the State.
Fiscal outlook
The 2014-15 Budget is being delivered in accordance with a fiscal strategy and outlook that
supports a strong financial position for the State as evidenced by the maintenance of the State’s
triple-A credit rating.
The fiscal outlook demonstrates the prudent approach taken by the Government since 2011,
to ensure that government finances are on a sound and sustainable footing. The underlying
improvement in the State’s budget result is masked by the continuing impacts of the changed
accounting standard to the valuation of employee benefits (AASB 119) and unexpected changes
to federal-state finances announced in the Commonwealth Budget on 13 May 2014.
In 2013-14, revenues increased to $65.4 billion – an increase of $2.9 billion from the original
estimate set out in the 2013-14 Budget. This largely reflects stronger than expected collections of
state taxes on the back of the strength of the housing market; increases in GST revenues flowing
from higher consumption growth; and both re-profiled and new grants from the Commonwealth
Government for major infrastructure projects. From this higher base, modest revenue growth is
expected in 2014-15 and across the forward estimates. The underlying trend in aggregate
revenues, however, is distorted by the re-profiling of grants received from the Commonwealth
Government.
Budget Statements 2014-15
Overview - i
Expenditure growth continues to be effectively managed, with nominal expense growth in
2013-14 in line with the original estimate of 4.9 per cent growth on 2012-13. Expense growth
over the forward estimates will continue to be carefully managed, with average nominal growth
of 3.4 per cent expected in the four years to 2017-18. This includes the Government’s
commitment to increase expenditure in health services by 5.2 per cent.
A key part of managing government expenses has been the Government’s wages policy.
Employee expenses have been affected by structural changes to the general government
sector implemented by the Government to enhance service delivery resulting in more than
5,000 employees who were previously employed in the Public Trading Enterprise sector being
now in the general government sector. The Government has also increased the number of
frontline staff by more than 8,000.
Chart 1 shows that, as a result of these stronger revenues and restrained expense growth, the
budget result has improved since the 2013-14 Budget, with a trajectory of increasing surpluses.
Chart 1:
Budget Result: 2013-14 Budget compared with 2014-15 Budget
2,500
2,000
1,500
$ millio ns
1,000
500
0
-500
-1,000
-1,500
-2,000
-2,500
2013-14
2014-15
2013-14 Budget Result
2015-16
2016-17
2014-15 Budget Result
Chart 2 presents the budget result adjusted for the re-profiling of Commonwealth funding and
AASB 119. It shows significantly stronger surpluses across all years.
Overview - ii
Budget Statement 2014-15
Chart 2:
Budget Result excluding impacts of Commonwealth Budget and
amendments to AASB 119
3,500
3,000
2,500
$ millio ns
2,000
1,500
1,000
500
0
-500
2013-14
2014-15
2014-15 Budget Result
2015-16
2016-17
2017-18
Budget Result (excluding Commonw ealth re-profiling and AASB 119)
The highly successful outcome of the long-term lease of the Port of Newcastle, combined with
the Government’s wider asset recycling strategy and a significant improvement in the 2012-13
and 2013-14 operating results, has further improved the State’s balance sheet and net debt
position. This has given the Government capacity to accelerate further investment in productive
infrastructure such as the $14.9 billion WestConnex motorway, the $3.0 billion NorthConnex
motorway and the $3.5 billion Western Sydney Roads package to support Sydney’s second airport
at Badgerys Creek. The State contributions to these projects are fully incorporated into the
2014-15 Budget estimates and the net debt outcomes as set out in Chart 3.
Chart 3:
General Government Sector Net Debt
25,000
20,000
$ millions
15,000
10,000
5,000
0
2012-13
Actual
2013-14
Revise d
2012-13 Budget
Budget Statements 2014-15
2014-15
Estimate
2015-16
Estimate
2013-14 Budget
2016-17
Estimate
2017-18
Estimate
2014-15 Budget
Overview - iii
Economic outlook
The New South Wales economy is well-placed to grow in light of the changing economic
conditions as the mining-investment boom unwinds. Rising momentum through 2013-14 is
expected to result in above-trend growth of around 3 per cent in each of the three years to
2015-16. Growth will be led by household consumption and dwelling investment initially and be
underpinned by a strong improvement in non-mining business investment later. Above-trend
employment growth of around 1¾ per cent in 2014-15 and 2 per cent the following year is
expected, resulting in a steady fall in the unemployment rate through 2015-16. Chapter 2,
The Economy provides more detail.
Valuable contributions to these strong outcomes over the next few years come from
Government programs promoting employment (the Jobs Action Plan) and new dwelling
investment (the Building the State package), together with the increased activity generated by record
levels of infrastructure spending.
These positive outcomes in New South Wales come against the backdrop of a global economy
that is forecast to improve modestly over the next year or so and a national outlook that remains
relatively subdued. The transition away from mining-investment led growth appears to have
begun as domestic non-mining sectors are showing signs of improvement.
Overview - iv
Budget Statement 2014-15