Overview
Fiscal Position and Outlook
This Budget continues repairing the State’s finances while funding infrastructure needs,
improving service delivery, supporting the vulnerable and driving economic growth.
Complicating the fiscal task is another downward revision in revenue following other similar
pressures in the last two years. However, even with these downward revisions, this Budget
delivers surpluses in both 2015-16 and 2016-17. It does so despite changes to the accounting
standards from 2013-14 onwards that detract around $1.3 billion a year from the Budget result
going forward. These changes do not have any impact on the State’s cash or debt position (see
Chapter 1, Box 1.1). The Traditional Budget Result shows the Budget in surplus from 2014-15
onwards.
Chart 1:
Budget Result
2,000
1,000
829
660
535
500
$ million
1,526
1,305
1,500
157
0
-500
-329
-374
-563
-1,000
-1,500
-2,000
-1,890
-2,500
2011-12
Actual
2012-13
Revise d
2013-14
Estimate
Traditional Budget Re sult
2014-15
Estimate
2015-16
Estimate
2016-17
Estimate
Budget Re sult
Revenues on a no policy change basis are almost $700 million lower across 2012-13 and 2013-14
than forecast in the 2012-13 Budget. 2012-13 revenue growth is now anticipated to be only 0.9
per cent compared to 2.2 per cent growth projected in the 2012-13 Budget. Lower
Commonwealth Government payments – both GST pool revenues associated with a weaker than
anticipated national economy and lower National Partnership payments – are a major
contributor. Weakness in royalty receipts and State taxes also contribute to the 2012-13 result.
State taxes are expected to improve from this lower base in 2013-14 and grow by an average of
6.6 per cent per annum over the four years to 2016-17, reflecting a modest recovery in state
conditions as well as revenue policy decisions in this Budget. Total average annual revenue
growth over the forward estimates will be around 4.5 per cent. Chapter 6, General Government
Revenues, has full details.
Budget Statements 2013-14
Overview - i
Expenditure restraint continues to be the main theme of fiscal repair to make the State’s finances
sustainable. For the third year running, expenses are expected to come in under budget in 201213. Expenses are now anticipated to grow by only 2.7 per cent in 2012-13, compared with the
2012-13 Budget forecast of 3.0 per cent. Although 2013-14 expenses are expected to be 7.5 per
cent above the 2012-13 estimate, once the impact of the accounting change is removed, expense
growth in 2013-14 will be 4.9 per cent and average expense growth will be 3.7 per cent per year
over the four years to 2016-17. Across the four years, expense growth will be kept below revenue
growth.
The 2013-14 Budget includes additional savings measures to compensate for the lower expected
revenues. Extension of efficiency dividends in this Budget worth $750 million brings total savings
to $18.9 billion over the six years to 2016-17. Employee expenses - nearly half of total expenses
and a key focus of reform for the Government - will grow by just 1.9 per cent in 2013-14 and 2.8
per cent on average over the four years to 2016-17. Refer to Chapter 5, General Government
Expenditure for full details.
By prioritising expenditure and restraining expense growth, the Government has created fiscal
room for important priorities, including important initiatives in education, infrastructure,
disability services and service delivery. The Budget includes a New South Wales contribution of
$1.76 billion over six years towards the additional $5 billion from the National Education Reform
Agreement to fund schools and deliver reforms for NSW students. Another key reform funded
in this Budget is the launch of the National Disability Insurance Scheme in the Hunter ($585
million) which will support the lives of 10,000 people by July 2016.
Funding for a range of important infrastructure projects is also included. There is a
$1.8 billion commitment over the forward estimates for WestConnex, $165 million for Bridges
for the Bush, $4.1 billion for North West Rail link, $5.1 billion for the Pacific and Princes
Highways upgrades, around $4 billion for health and $2 billion for education.
In the four years to 2016-17 Total State capital spending will total $59.7 billion. Further details
are in Budget Paper No. 4 Infrastructure Statement.
The Government is also investing in the growth drivers of job creation and housing by reforming
payroll tax and investing further in the Housing Acceleration Fund. These reforms, together with
others discussed in Chapter 3, Supporting Economic Growth, will drive the economic growth needed
to ensure improved living standards and enable the Government to deliver on its broad policy
objectives.
Successful asset transactions such as the long-term leases of Port Botany and Port Kembla not
only allow for funding from Restart NSW for key infrastructure priorities over coming years, but
also improve the balance sheet in the medium term. The return to significant Budget surpluses
over the forward estimates also ensures that the State’s much needed investments in
infrastructure will need less debt funding and contributes to an overall improved fiscal position
which will assist in the retention of the triple-A credit rating.
The strengthening of the State’s balance sheet is evidenced by the improvement in the debt
position. As Chart 2 shows, a significant improvement in general government net debt is forecast.
General Government net debt for 2013-14 is now forecast to be $15.7 billion
Overview - ii
Budget Statement 2013-14
(3.2 per cent of GSP), down from almost $22 billion (4.4 per cent of GSP) forecast in the 201213 Half-Yearly Review. Total State net debt is expected to be $49.1 billion in 2013-14
(9.9 per cent of GSP), lower than the Half-Yearly Review estimate of $59.7 billion (12.0 per cent
of GSP).
General Government Net Debt
Chart 2:
30,000
25,000
$ million
20,000
15,000
10,000
5,000
2011-12
Actual
2012-13
Revise d
2012-13 Budget
2013-14
Estimate
2014-15
Estimate
2012-13 Half-Ye arly Review
2015-16
Estimate
2016-17
Estimate
2013-14 Budget
Economy
The global economy is forecast to gradually improve, but the outlook remains fragile and risks to
the downside remain. Nationally, the short term outlook is softer, and there is major uncertainty
in the timing of the transition away from growth generated through mining investment towards
growth through exports and domestic non-mining sectors.
The NSW economy is expected to transition more moderately than nationally, given its
diversified industry structure and relatively small exposure to the mining boom. Growth is
forecast to return to trend of 2¾ per cent in 2013-14, and remain there in 2014-15.
Key growth drivers will be household consumption, housing investment, public investment and
non-rural exports. Employment is expected to grow at around trend, with the unemployment rate
drifting slightly higher as forecast nationally. Chapter Two,
The Economy provides more detail.
In the near term, as the economy transitions away from the mining investment-led boom,
support will also come from this Government’s Budget reforms to support jobs and housing
growth as well as the large infrastructure program.
Budget Statements 2013-14
Overview - iii