NSW Budget 2005

1. About this Occasional Paper

This occasional paper provides a basic summary of some aspects of the NSW budget of interest to Hawker Britton’s clients. It covers some of the new expenditure budget announcements on:

  • transport;
  • utilities;
  • key services; and
  • tax and debt measures.

Where possible, this paper lists only projects representing new capital commitments or expanded scope for previously announced projects. For various reasons (the listing of unfinished projects, unspent allocations, etc), it has not been possible to guarantee this has always been achieved.

For more information about specific areas of the budget, please call your usual Hawker Britton contact who will be able to provide additional information.

A full set of NSW Government budget media releases is also available.

2. Political summary

With a few notable exceptions, key budget measures were anticipated by the media over the last week. Among these were:

  • partial reversal of the changes to land tax from last year’s mini budget;
  • increase in infrastructure spending;
  • increase in spending on key services like education, health and police; and
  • modest increased borrowings to fund infrastructure investments – the bulk of which will be undertaken by State Owned Corporations (SOCs).

An increase of four percentage points in the rate of stamp duty on general insurance from 1 September 2005 was not anticipated by the media.

In general, it is likely that the budget will be seen as representing relatively low political risk in that:

  • it provides substantial increases in funding for key services (including police, education and schools);
  • it provides a marked increase in government infrastructure spending;
  • while borrowing (by government and state owned corporations) has increased, it has not increased drastically and it is unlikely that the level of borrowing will impact on credit ratings in any material way; and
  • it partially reverses a tax decision which was generally opposed in the community (although does not address the Vendor Tax).

3. Transport measures

3.1 New Rail Expenditure

Many of these projects run over multiple years and represent additional allocations in these portfolios.

These announcements represent approximately $152M in new (not previously announced) rail capital works in 05/06 and a total (including expanded scope of existing projects) of $682M over the periods specified.

  • $15.5M in 05/06 on new signalling on Oatley-Cronulla line ($49M over 3 years)
  • $84M in 05/06 on 81 outer suburban rail carriages (OSCs) ($262M over 3 years)
  • $17.1M in 05/06 on 498 new suburban rail cars (PPP) ($300M over 4 years)
  • $9M in 05/06 on upgrades to XPT cars ($19M over 3 years)
  • $5.1M in 05/06 on easy access upgrade for rail stations ($24M over 2 years)
  • $2.6M in 05/06 on radio onboard communications ($5.2M over 2 years)
  • $0.5M in 05/06 on central station power upgrade ($6.5M over 3 years)
  • $8M in 05/06 on vigilance control ($10M over 2 years)
  • $10.5M in 05/06 on upgrade of Rhodes Station 1

3.2 New Bus Rolling Stock and Infrastructure Expenditure

Many of these projects run over multiple years and represent additional allocations in these portfolios.

These announcements represent approximately $29.4M in new (not previously announced) bus-related capital works in 05/06 and a total (including expanded scope of existing projects) of $227.9M over the periods specified.

  • $19.4M in 05/06 on 268 new standard buses for Sydney and Newcastle ($137.9M over 4 years)
  • $10M in 05/06 bus priority network (road developments) ($90M over 3 years)

Funding for the new North West Bus Transitway was announced (a roads project):

  • $130M in 05/06 on the North West Bus Transitway

3.3 New Roads Expenditure

The road funding announcements represent estimated total expenditure in 05/06.

  • $27M in 05/06 on the orbital strategy
  • $176M in 05/06 on the Old Windsor Road and Windsor Road upgrades
  • $38M in 05/06 on the Great Western Highway upgrade
  • $221M in 05/06 on the Pacific Highway upgrade
  • $23M in 05/06 on the Cowpasture Road upgrade
  • $21M in 05/06 on the Narellan Road upgrade
  • $14M in 05/06 on the Five Islands Road upgrade
  • $18M in 05/06 on the North Kiama Bypass
  • $9.4M in 05/06 on the Lawrence Hargrave Drive upgrade

4. Energy

4.1 New Distribution and Transmission Expenditure

Key capital expenditure announcements included:

  • $504M in 05/06 for Energy Australia for substation equipment replacement, switchgear and cabling replacement at Chatswood and Crows Nest, construction of new zone substation, catering for high-load growth in Green Square and Alexandria and replacing infrastructure in the CBD
  • $361M in 05/06 for Integral Energy for capital refurbishments, high voltage distribution program, underground residential developments, establishment of Bella Vista and Hoxton Park zone substations
  • $446M in 05/06 for Country Energy for the Ballina zone substation, new substation at Lismore, upgrading Griffith zone substation, upgrading supply to Wagga Wagga CBD and commercial areas and upgrading Cudgen zone substation
  • $192M in 05/06 for Transgrid for expanding the high voltage network, including the Coffs Harbour substation and upgrading transmission lines, transformers and substations across the state

4.2 Energy Generation

No new announcements were made on generation expenditure. Any announcements on generation are likely to accompany the release of the White Paper on energy later in the year.

5. Key services measures

5.1 New Education Capital Expenditure

The education budget will top $10B for the first time. Key capital projects will include:

  • $16.2M in 05/06 on 20 new major capital works projects for schools (including 2 new schools) ($100M over 4 years)
  • $22M in 05/06 on 12 new major capital works projects for TAFE colleges ($60M over 4 years)

5.2 New Police Capital Expenditure

Key capital projects will include:

  • $12.2M in 05/06 on six new police stations (Campsie, Dubbo, Fairfield, Lismore, Orange, Wagga Wagga) ($72M over 3 years)
  • $257M for new centre for 500 prisoners plus upgrades at Cessnock and Lithgow

5.3 New Prison Expenditure

An additional $345M on capital and recurrent projects was announced. The key capital project will be a new 500 inmate correctional facility. Components include:

  • $2.1M in 05/06 on 1000 new inmate beds ($173M over 4 years)

5.4 New Health Capital and Services Expenditure

The Health budget will total almost $11B in 05/06. This includes new capital expenditure of $649M in 05/06 ($2.5B over 4 years).

Key capital projects will include:

  • $6M in 05/06 on redevelopment of Bathurst, Orange and Bloomfield Hospitals ($149M over 4 years)
  • $3.5M in 05/06 on redevelopment of Queanbeyan Hospital ($44M over 3 years)
  • $3.6M in 05/06 on improvements to Manly and Mona Vale Hospitals ($5M over 2 years)

Key new expenditure in health services will include:

  • $202M in 05/06 on 322 new hospital beds ($808M over 4 years)
  • $25M in 05/06 on new intensive care services ($100M over 4 years)
  • $46M in 05/06 on mental health services ($300M over 4 years)

6. Tax and debt-related measures

6.1 Debt Measures

There will be an increase in public sector debt.

  • general government debt will increase by $700M
  • total state debt (including SOCs) will increase by $2.6B

6.2 Tax Measures Key budget tax initiatives include:

  • the land tax threshold will be re-introduced at a level of $330,000 at a marginal rate of 1.7% from 1 January 2006. The threshold will be indexed annually.
  • the vendor duty remains in place �� general insurance stamp duty rate (on certain insurance policies) will increase from 5% to 9% from 1 September 2005 (revenue of approximately $650M over four years)