The Hon Dominic Perrottet MP Treasurer

New South Wales

2018-19 Half Yearly Budget Review Tuesday 18 December 2018 - Sydney

3

In 2011, NSW was underperforming on many fronts

A new approach to financial and economic management was needed

10-year average economic growth to June 2011

Low jobs growth in the 10-years prior to April 2011

Projected debt by 2014-15

Projected deficit by 2014-15 Infrastructure backlog

1.4%

$14.5b

2.1%

$2.4b $30b

“ [NSW is] leading the country

in the wrong direction. The

unemployment rate is higher

than the national average,

[and] our projected economic

growth is the lowest of all

mainland states.

NSW Business Chamber, 2009 ”

31,400 6.5% 10-year average expense growth rate (2001-02 to

2010-11)

-$1.57

-$0.11

$0.15

-$0.55 -$1.73

$1.25

$2.88

$4.66 $5.72

$4.18

$1.12

-3-2-10123456

2008-09 2010-11 2012-13 2014-15 2016-17 2018-19

NSW's Surplus Position General Government Sector

4

From 2011, the work of budget repair commenced

Every dollar of the surplus is reinvested into infrastructure

Fiscal Responsibility Act 2012

Wages Policy

Contestability

Targeted savings measures

Repair Measures $billions

Since 2011-12, surpluses have averaged $2.3b

5

The next step was to rebuild our infrastructure using asset recycling

We’re delivering record investment in health and education & skills infrastructure

3 metro projects, 5 motorways, 3 light rails, and an airport

40 new and upgraded hospitals

170 new and upgraded schools

6

Public investment has turbocharged our economy

NSW today is being completely transformed

$ millions

0

4,000

8,000

12,000

16,000

20,000

2003-04 2006-07 2009-10 2012-13 2015-16 2018-19Revised

Capital Expenditure General Government Sector

Average $4.9

Average $10.3 billion

$18.

5 billion

Supporting around 73,000 jobs per year since 2011-12

Helping public investment to continue to be a source of strength for the economy

Underlying public investment contributes around ½ a percent point to economic growth in 2017-18

Drives business investment and confidence

Record public sector capital investment…

-20-10

010203040506070

Net debt with and without asset recycling General Government Sector

Net Debt Net Debt without Asset Recycling

Our debt levels would be significantly higher without recycling assets

7

The asset recycling strategy keeps net debt low and funds valuable infrastructure

Lowest net debt position in NSW history

$ billions

8

Today’s result is a reaffirmation of our financial strength

The fundamentals of the NSW economy and Budget remain strong

Budget surplus

$1.4b 2018-19 projection

Budget

HYR Net debt

-$7.7b Negative net debt

Credit rating

Triple-A Moody’s and S&P

Unemployment rate

4.9%

Unemployment rate

4.4% Unemployment

lowest of all States

Net debt

$2.6b

Credit rating

Triple-A Reaffirmed by Moody’s

and S&P

Capital expenditure

$87.2b Over 4 years

Budget surplus

$1.1b Revised 2018-19

projection

Capital expenditure

$89.7b Record capital

expenditure

Economic fundamentals remain strong with continued employment growth

9

But the NSW economy is facing new headwinds

[VALUE]%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

NSW TAS VIC QLD SA WA

GSP Per capita growth since 2013-14

NSW had the strongest average GSP per

capita growth of all states since 2013-14

%

4.4 5.3 0.0

2.0

4.0

6.0

NSW Rest of Australia

State Unemployment Rates

%

NSW has the lowest unemployment of all states

Drought impact and cooling property market are weighing on growth

10

0

10

20

30

40

NSW VIC QLD SA WA Aus

Winter Crop Production - 2018-19 Forecast Millions of tonnes

As at JunQ-18 ABAREScrop report

Forecast crop production is the lowest since 1994–95

Cyclical factors have seen growth moderate

-20

-10

0

10

20

30

40

Jul-2002 Jul-2007 Jul-2012 Jul-2017

Per c

ent,

thro

ugh

the

year

House price growth in NSW % through the year

Sydney house prices growth

Rest of NSW house pricesgrowth

335

337

339

341

343

2018-19BudgetTotal

Revenue

Transfer duty Payroll tax,GST and

other

2018-19 HYRtotal revenue

Changes to forecast revenue for 2018-19 to 2021-22

2018-19 Half Year Review compared to 2018-19 Budget

11

Transfer Duty has softened but other revenues have kicked in

+$5.4b

-$2.5b

+$2.9b

$342.1b

Transfer duty write-downs have been offset by other revenues, and we continue to deliver surpluses

$ billions

$342.1b

$339.2b

0

1

2

2018-19 2019-20 2020-21 2021-22

$1.3b Average surplus

over forward estimates

$ billions

NSW’s Surplus Position

General Government Sector

Our strong financial position has enabled us to invest where it matters

12

$500 million Emergency Drought Relief Package

$6.4 billion to NSW schools over the next 10 years

1,500 more police for safer communities

$643 million to better support and protect NSW firefighters

Significant investments in frontline services that make a difference both in metro and regional areas

We’re using our budget to help with your budget

13

Payroll Tax Higher

thresholds

Payroll tax Easier

administration

Active Kids $100 per child

Creative Kids $100 per child

Toll Relief Over 140,000

motorists eligible

More Toll Relief Over 300,000

motorists eligible

Service NSW • One stop shop • One click energy • CTP Refunds

Service NSW in the regions

FHB Relief Up to $34,360

Indexing Transfer Duty $185 million over

4 years

Easy to do Business

Business Licence

Renewals

First we had…

…and in addition we now we also have

Our infrastructure agenda continues to reach record highs

14

+$1.2b

$24.3m $24.3b

0

10

20

30

40

50

60

70

80

90

100

2014-15 to 2017-18 2018-19 to 2021-22

$ bi

llion

s

Capital Expenditure Non-Financial Public Sector

$89.

$65.

37%

Record infrastructure spend of $89.7 billion over four years

General Government infrastructure spending by jurisdiction

NSW is significantly outperforming other states when it comes to capital investment

15

The facts on infrastructure investment matter

2% Stadiums

98%

Infrastructure spend

Schools, Hospitals, Transport, and Other

Our priorities are demonstrated by our investments - schools, hospitals and public transport

170

40 3

0

50

100

150

200

New andupgradedschools

New andupgradedhospitals

Stadiums

Infrastructure Initiatives

We’re rebuilding the Premier state 2019

Artarmon Public School Upgrade Auburn North Public School Ballina Coast High School

Dubbo Networked Specialist School Parramatta Public School

Penrith Public School Queanbeyan High School

2020 Epping Public School Monaro High School

Newcastle East Public School Penshurst West Public School

Ryde West Public School Tweed Heads South Public School

Willoughby Girls High School

2021 Alex Avenue New Public School

Armidale Secondary College Catherine Fields New Public School

Croydon Public School Harrington Park Public School

Leppington new Primary School Warnervale Primary School

Wentworthville Public School

2022+ Alexandria Park Community School

Redevelopment Chatswood Education Precinct Bankstown North Public School Liverpool West Public School

Picton High School Sydney Olympic Park High School

Opened Central Sydney Intensive English High

School Relocation Cherrybrook Technology High School

Killara Public School Marie Bashir Public School O'Connell St Public School

St Clair High School Wentworth Point Public School

Bankstown-Lidcombe ED Broken Hill Hospital and Dental Facility

Dubbo Western Cancer Centre Gosford Hospital Redevelopment

John Hunter Children's Hospital NICU Lismore Hospital Redevelopment

St George Hospital Birthing Suite & Theatre Refurbishment Muswellbrook Hospital

Blacktown & Mt Druitt Hospitals S2 Coffs Harbour Hospital Expansion Cooma Hospital Redevelopment

Dubbo Hospital Stage 3&4 Griffith Hospital Stage 1

Hornsby Hospital Stage 1&2 Manning Base Hospital

Campbelltown Hospital Stage 2 Goulburn Hospital Redevelopment

Liverpool Health Precinct Nepean Hospital and Ambulatory

Shellharbour Hospital Stage 1 Tweed Hospital and Ambulatory Wagga Wagga Base Hospital Westmead Hospital Stage 1

Blacktown & Mt Druitt Hospitals S1 Broken Hill Mental Health Unit

Dubbo Base Hospital Stage 1&2 Grafton Base Hospital Stage 2

Liverpool Hospital Redevelopment Northern Beaches Hospital Royal North Shore Hospital

Grafton Bridge Sydney Metro Northwest

Newcastle Light Rail Sydney Airport East Precinct Roads

CBD and Southeast Light Rail WestConnex Stage 1B

Easing Sydney’s Congestion, Pinch Points and Clearways Packages 1 and

2

M1 Widening Central Coast M4 Smart Motorway

NorthConnex Pacific Highway Duplication

WestConnex Stage 2 New England Highway, Scone Bypass

Northern Beaches Hospital, Road Connectivity and Network

Enhancements

M4 Smart Motorway Barton Highway Improvements

Golden Highway Safety and Productivity Works Gunnedah Bridge

Bolivia Hill Upgrade

F6 Sydney Gateway

Sydney Metro City & Southwest North-South Rail

Parramatta Light Rail Stage 1 WestConnex Stage 3

Berry to Bomaderry Upgrade New Intercity Fleet

52 Stations Upgraded B-Line Buses

New Waratah Series 2 Trains New Emerald Ferries South-West Rail Link

WestConnex Stage 1A Wynyard Walk

Broken Hill Pipeline National Parks and Wildlife Services:

Aviation Asset Replacement Wattamolla Visitor Precinct Western Sydney Stadium

E.S. Marks Safety Upgrade

Australian Museum Captain Cook Landing Memorial Minnamurra Rainforest Centre

Royal Coast Track Improvements Thredbo Valley Track Extension

Campbells Cove Domain Upgrade

ANZ Stadium Light to Light Great Walk

Murramarang South Coast Walk Walsh Bay Arts Precinct

Shoalhaven System Upgrade Bringelly Road Business Hub

Powerhouse Museum Sydney Fish Market

Sydney Football Stadium Sydney Modern

Taronga Western Plains Zoo Visitor Centre

Western Sydney Airport Western Sydney Plant Centre

ANZAC Memorial Barangaroo Precinct

Darling Harbour & ICC Precinct Sydney Opera House Renewal Stg 1

Taronga Institute of Science and Learning

The Calyx at the Royal Botanic Gardens

Children’s Wild Play Garden

Schools

Hospitals

Transport & Roads

Culture, Precincts &

Others

Bulli Hospital Aged Care Grafton Ambulatory Care

Port Macq. Mental Health Expansion Nepean Hospital Car Park

Shoalhaven Hospital Car Park Campbelltown Hospital Car Park

Hornsby Hospital Car Park

We’re keeping debt at sustainable levels into the future

17

…through the NSW Generations Fund

-

5,000

10,000

15,000

20,000

25,000

30,000

June 2019June 2020June 2021June 2022June 2023June 2024June 2025June 2026June 2027June 2028

NSW Generations Fund

$10 billion Principal Fund growth and additional contributions

$ millions

The NGF is expected to grow to more than $25b by the end of the next decade

$25b+

18

Key risks potentially lie ahead based on other approaches

Policy deviation poses a clear and present danger to the finances of NSW

Cancelling infrastructure projects

Economic growth stalls

Job growth slides

Budget Deficits forecast

Higher taxes

Public investment

drops

Sovereign risk increases

Business confidence

drops

Less schools & hospitals

Cuts to frontline services

Increased levels of debt

Reduced fiscal discipline

Stopping asset recycling

NSW is a better place today than it was 8 years ago

Fiscal Strongest in decades

Economy Booming

Delivery Record

investment Budget Surplus 2018-19 $1.1 billion Budget Surplus 4-year Average $1.3 billion Credit Rating Triple A Net Debt Negative $7.7 billion Net Worth Over quarter of a trillion NSW Generations Fund $10.0 billion

GSP per capita Growth Strongest state on average since 2013-14 Employment Around 575,900 jobs since 2011 Unemployment Rate Lowest of any state Housing Supply 65,100 completions in 2017-18 Public Investment $89.7 billion capital program Labour Participation Rate At a record 65.2%

Reducing tax Fairer and more affordable CTP Making housing more affordable Indexing transfer duty thresholds Reducing the cost of living Toll relief Making communities safer 1500 additional police Building infrastructure $89.7 billion capital program Making it easier to do business Lowering payroll tax threshold

Forecasting Conference Outlook for markets, policy and politics Wednesday 13 February 2019 – Sydney

abe.org.au