NSW Budget 2021-22

Overview

• Back on Track, aiming for back in the black: Deficit of $7.9 billion for 2020-21, half the forecast of $16 billion just seven months ago. $8.6 billion deficit for 2021-22, returning to a forecast surplus of $0.5 billion in 2024-25 with a pathway for public sector pay rises without significant business tax hikes.
• Payroll tax and small business support continue: This Budget stays the course on the significant advocacy wins for Business NSW confirming $2.4 billion worth of cuts to payroll tax and incentives for businesses that relocate or expand their jobs footprint in NSW. There is also relief from government fees and charges for smaller businesses that do not pay payroll tax. 
• Great for schools, disappointing for skills: For a Budget aimed at boosting productivity, while it delivered a record budget for schools, it was disappointing for the skills portfolio with a reduction of $80m in TAFE funding even though the system is under significant pressure due to the 19.8 per cent increase of apprentices and trainees in training in NSW compared to 2020. Many initiatives were either cost-neutral (e.g. amendment of school hours) or extensions of successful existing initiatives (e,g. JobTrainer program and free early childhood education)

The unemployment rate has fallen from 7.1 per cent in July to 5 per cent in May – two years sooner than forecast. Not only have we recovered all 270,000 jobs lost to the pandemic, we have added 36,000 more.

Budget Speech June 2021 Dominic Perrottet, NSW Treasurer                  

Highlights for business

• Vaccine Roll-out: as called for in the Business NSW Pre-Budget Submission, a faster vaccine take-up has been supported with $260 million direct state funding, an extra $796 million for “Covid defence” taking NSW expenditure to over $4 billion.
• Payroll tax thresholds and cuts: Last year’s changes to payroll tax have been retained - the payroll tax threshold holds at $1.2 million. Since the beginning of the pandemic the rate of payroll tax has been lowered from 5.45 to 4.85 per cent. The threshold increase alone has delivered an annual saving of $10,900 (for businesses above the new threshold), with further savings over the next two years.
• Dining and entertainment vouchers: A new $50 million CBD Friday Dine and Discover Voucher adds to the $500 million for the existing vouchers to every NSW adult to spend at entertainment and hospitality venues until the end of July. This will support customer school holiday demand in key parts of the economy that are still struggling.
• SME Fees and Charges Rebate: SMEs that do not pay payroll tax will continue to receive a $1,500 digital voucher to use against the cost of NSW Government fees and charges.
• Business Investment and Job creation: the focus on attracting new business investment is maintained through the $250 million Jobs Plus program. Businesses that create more than 30 jobs will continue to be exempt from payroll tax on these new jobs beyond this threshold until 2024.
  
• Targeted support: relief for those sectors hardest hit by COVID-19 such as tourism, hospitality and the arts. This includes $500 million to transform the existing Powerhouse Museum in Ultimo, $119 million to transform Macquarie Street East into a cultural hub, and $40 million to bring major cultural exhibitions and events to NSW.   
• New vehicle incentives: The Budget exempts purchases of electric vehicles from motor vehicle duty for four years and offers $3000 rebates for low emissions vehicles.
• Modernised licensing: $104 million for the development of digital license schemes to make it easier for businesses to gain authorisation to perform an activity, and for regulators to manage licenses and compliance. Initial efforts will be focused on trade, conveyance, asbestos and paintball licences.
• Infrastructure: The NSW infrastructure pipeline has expanded to $108.5 billion. Most prominent among the new initiatives confirmed in this budget are the creation of Bradfield City Centre beside Western Sydney Airport, funding for the M6 extension to Kogarah, funding to continue planning for Parramatta Light Rail stage 2, and an extra $380 million to support the development of Renewable Energy Zones. Review all infrastructure investments here (page 17). 
• Regional NSW: Regional NSW benefits from $10.2 billion from the Restart NSW fund devoted to investment in regional projects. This represents an increase of $238 million over the previous budget of November 2020, with new projects including the Singleton bypass on the New England Highway, rail upgrades between Junee and Griffith, and road strengthening between Narrabri and Moree. Read Regional NSW publication.
• Infrastructure Contributions Reform: The Budget provides funding and signals the introduction of legislation to overhaul the infrastructure contributions process, improving incentives for Councils to permit development and streamlining the process for applicants.
• Promoting NSW business in international markets: The NSW Government is continuing initiatives to boost exports, growing its footprint of international trade offices and industry support programs.
• Skills: the TAFE and the skills portfolio saw an overall reduction in funding from last year’s Budget. The Government did, however, confirm $11.4 million funding for Careers NSW which has been a long-standing Business NSW advocacy issue. It also announced a further $13.2 million for the new Institutes of Applied Technology and confirmed a $318.6 million extension of the JobTrainer program in partnership with the Commonwealth.
• Workplace safety: SafeWork NSW has been allocated an additional $6.4 million to recruit 40 new inspectors.

We are back to growth and back on track.

Budget Speech June 2021                   

REFORM

• Embedding a productivity agenda: The Treasurer has committed to implementing a productivity agenda based on the recommendations of the NSW Productivity Commissioner’s White Paper including 6 monthly updates to the NSW Parliament on legislation and implementation.
• Property tax reform: Business NSW has long advocated for the need for state-based tax reform. Continued progress of the Treasurer’s proposal for property tax reform with a plan to replace stamp duty, a tax on transactions which disincentivises efficient use of land and property, is welcome as is further consultation with commercial property owners on the proposal. More on Property Tax Proposal.
• Education: There were significant increases in schools funding in line with the NSW commitment under the National School Reform Agreement, and an additional $2.1 billion over four years to deliver 44 new and upgraded schools across the state.
• Attracting more teachers: $125 million has been provided to develop a Teacher Supply Strategy, which was a recommendation in the Productivity Commission’s recently released White Paper. The Budget also provides Alphacrusis College $2.9 million to attract more high achievers into teaching, particularly in regional NSW.
• Productivity gains through education reforms: The Government extended the provision of free early childhood education, with a view to a permanent extension, and introduced a pilot to greater flexibility to the school day to reduce the rising cost of traffic congestion in Sydney.
• Productivity gains through better regulation and innovation: The NSW Government continues to take the lead working with the Commonwealth and other states and territories on automatic mutual recognition arrangements to streamline requirements for those who obtain occupational licenses in a different jurisdiction to the one they work to facilitate a nation of trades without borders.  

 Economic activity is back above pre-COVID levels.

Budget Speech June 2021                   

Fiscal & economic outlook

• Outlook for NSW: Economic activity for 2020-21 is expected to have grown by ¾ per cent in stark contrast to expectation just seven months ago and rebounding to 3 ¼ per cent in 2021-22 supported by an improved vaccine roll out and despite closed international borders.
• Unemployment rate well down after peak: Unemployment is down to 5.3 per cent after a peak of 7 per cent with a gradual fall to an assumed full employment rate of 4.5 per cent in 2024-2025.
• Debt and deficit: A deficit of $7.9 billion was recorded in 2020-21 well down from the last Budget which had forecast a $16 billion deficit. A deficit of $8.6 billion is forecast for 2021-22 before a rapid improvement in the Budget Result to a surplus of $466 million 2024-25 assuming public sector wages and other cost pressures are contained.  Net debt is projected to increase to 13.0 per cent of Gross State Product by June 2024. 

This budget winds back stimulus where it is no longer needed, and redirects support for maximum impact.

Budget Speech June 2021