NSW State Budget 2006

1. About this Occasional Paper

This paper outlines some of the key measures raised in the NSW Government’s 2006 budget which are of interest to Hawker Britton’s clients.

It is not intended to be a comprehensive guide to the budget measures.  A full copy of the budget papers is available at the NSW Treasury website http://www.treasury.nsw.gov.au/bp06-07/bpapers.htm

In addition to outlining announced budget initiatives, this paper provides a listing of projects representing new capital commitments or expanded scope on previously announced projects.  These are represented as “new allocations and/or service enhancements”. For various reasons (the listing of unfinished projects, unspent allocations, commercial-in-confidence allocations, etc), it has not been possible to guarantee this has always been achieved.

This paper briefly outlines some of the major budget measures of interest to Hawker Britton’s clients in the areas of:

  1. Treasury and taxation
  2. Education and Training
  3. Health
  4. Transport
  5. Energy
  6. Information and communications technology
  7. Attorney-General’s
2. Treasury and taxation
2.1        Deficit

As broadly predicted, the NSW budget will be in deficit for the 2006/07 budget year.  The Government forecasts moving back into modest surplus in the next budget year and into much stronger surplus positions in the subsequent years.

The following graph outlines the forecast over the next four years.

nsw budget surplus/defecit

2.2        Taxes

As expected following the NSW Treasurer’s negotiations with the Commonwealth, the budget included a program for reduction of a number of state taxes over four years.  The total net impact of these reductions over four years is budgeted at $3.2 billion.

These include changes to:

  1. Land tax (averaging of valuations over the previous three years and lifting of threshold)
  2. Vendor duty (abolition previously announced)
  3. Payroll tax concessions (previously announced in the February Financial and Economic Statement)
  4. Poker machine taxes (reduction previously announced)
  5. Taxation of family-held unit trusts
  6. Stamp Duty (abolition for hire of goods, leases, marketable securities and mortgages)

A full list of the reductions and their impact over four years is contained in this table.

2006-7

2007-08

2008-09

2009-10

TOTAL

Averaging Land Tax valuations

-57

-98

-117

-123

-395

Lifting Land Tax threshold

-53

-57

-60

-64

-234

Abolishing Vendor Duty

-382

-409

-429

-450

-1,670

Providing Payroll Tax concessions

-6

-13

-21

-40

Reducing Poker Machine Tax

11

-25

-80

-139

-233

Changing taxation of family-held Unit Trusts

-3

-3

-3

-3

-12

Abolishing Stamp Duty on hire of goods

-73

-81

-83

-237

Abolishing Stamp Duty on leases

-25

-80

-84

-189

Abolishing Stamp Duty on unlisted marketable securities

-106

-106

Abolishing Stamp Duties on mortgages and loan securities

-106

-106

Total

-484

-696

-892

-1,134

-3,206

Cost to government of cuts to State Taxes in 2006-07 include:

  1. Total tax cuts of $ 911M ($4.9 billion over 4 years)
  2. $382M from abolishing vendor duty ($1.6 billion over 4 years)
  3. $430M from workers compensation premium reduction ($1.7 billion over 4 years)
  4. $57M from land tax averaging ($395M over four years)
  5. $53M from increasing land tax tax-free threshold ($234M over 4 years)
3. Education and Training

The Education and Training budget will total $10.7 billion – a 5.1% increase on the 2005/06 allocation.

Key features include funding for:

  1. school maintenance
  2. security fences
  3. toilet facility upgrades
  4. an increase to the class size reduction program
  5. literacy and numeracy programs
  6. a range of capital works

Technology allocations include:

  1. $295M for 100,000 new computers for schools and 129 additional IT support staff
  2. $262M for internet access upgrades (bandwidth)
  3. $75M for email and other e-services
  4. $44M for other technology infrastructure projects

New allocations and/or service enhancements in 2006-07 include:

  1. $137M on reducing class sizes ($600M over 4 years)
  2. $30M for school maintenance ($120M over 4 years)
  3. $106M over 3 years on constructing ten new schools
  4. $6M for eleven major TAFE capital works projects including upgrading facilities at Wagga Wagga, Queanbeyan, Newcastle, Granville and Castle Hill TAFEs ($61M over 3 years)

As announced in last week’s State Infrastructure Strategy, the Government is committed to a third round PPP for ten new and upgraded schools.

4. Health

The overall health allocation has increased by 7.6% (or $828 million) in 2006/07 to a total of $11.7 billion.

Key features include funding for:

  1. 426 public hospital beds and bed equivalents
  2. new intensive care beds
  3. after hours GP clinics and integrated health services
  4. increased dental services
  5. new ambulance officers
  6. a substantial capital works program

New allocations and/or service enhancements in 2006-07 include:

  1. $52M on additional hospital beds ($208M over 4 years)
  2. $10M on additional ICU beds ($40M over 4 years)
  3. $31M on GP after-hours services ($142M over 4 years)
  4. $11M upgrade of Auburn and Liverpool Hospitals ($245M over 4 years)
  5. $18.5M for ambulance service ($47.2M over 4 years)
  6. $12.3M health information management technology ($28.5M over 4 years)
  7. $56M on new and expanded mental health services ($386M over 4 years)
5. Transport
5.1 Public transport

The overall public transport allocation has increased by 14.4% (or $435 million) in 2006/07 to a total of $3.4 billion.

Key features include funding for:

  1. passenger information systems
  2. continuation of the Rail Clearways Program
  3. bus priority measures
  4. rail rolling stock upgrades
  5. rail track work and infrastructure
  6. country rail maintenance
  7. new STA buses
  8. STA depot upgrades
  9. bus on-board security measures
  10. bus transitways

New allocations and/or service enhancements in 2006-07 include:

  1. $129M for land acquisition (north and southwest rail links – $440M over 4 years)
  2. $115M for air-conditioned rail carriages for CityRail
  3. $20M on North Sydney Station upgrade ($52M over 3 years)
  4. $36M for 237 new buses for Sydney-Newcastle
5.2 Roads

The overall roads allocation has increased by 14.4% (or $415M) in 2006/07 to a total of $3.3 billion.

Key features include funding for:

  1. Windsor road upgrade completion
  2. Pacific Highway program
  3. North-West Transitway
  4. Princes Highway program
  5. Wollongong Northern Distributor
  6. Great Western Highway program
  7. Spit Bridge widening

New allocations and/or service enhancements in 2006-07 include:

  1. $60M for Pacific Highway for accelerated upgrade
  2. $40M for Hume Highway duplication
  3. $40M for F3 Sydney to Newcastle
  4. $11M for Spit Bridge widening
  5. $40M for Karuah to Bulahdelah sections 2 and 3
  6. $75M for the Bonville bypass
  7. $20M for the Ballina bypass
  8. $5M for Nelson Bay Road (replacement of Tourle St Bridge)
  9. $25M for the Coolac bypass (at Hume Highway)

The State Infrastructure Strategy identified the M4 East extension and the Pacific Highway program as potential PFP projects.

6. Energy

Due to their status as State Owned Corporations, much of the detail of the generators, distributors and retailers activity is commercial in confidence.  As a result, energy budget measures are not necessarily detailed in the budget papers.

EnergyAustralia is expected to spend $719M, including:

    1. $137M to improve reliability
    2. $43M on distribution mains replacement
    3. $30M to replace cables at Lindfield/Willoughby

medi

  1. $13M to construct a zone substation in the Mayfield North area
  2. $17.5M to replace infrastructure and increase capacity and reliability to meet increasing demand in Sydney’s CBD

Country Energy is expected to spend $514 million

  1. $6.1M to update the Griffith zone substation
  2. $5.6M on the installation of high voltage transformers at Lismore
  3. $5.5M on a zone substation at Lennox Heads
  4. $3.8M on the Oxley Vale zone substation at Tamworth
  5. $3M to upgrade the feeder at Terranora
  6. $2.2M to upgrade a transformer at Port Macquarie
  7. $3.4M on the Goddard Lane zone substation in Tamworth
  8. $2.7M to augment the Narrandera zone substation
  9. $2.7M to augment the substation at Corowa
  10. $2M to upgrade the bulk supply point transformer at Stroud

Integral Energy is expected to spend $458 million:

  1. $19.4M to upgrade the Penrith transmission substation;
  2. $17.5M to establish the Mount Ousley zone substation;
  3. $15.9M to establish the Wetherill Park transmission and zone substation;
  4. $10.3M to establish the Bella Vista substation;
  5. $9.3M for the installation of underground cables in new urban residential subdivisions; and
  6. $9.2M for new industrial and commercial customer connections

Macquarie Generation is expected to spend $167M.

Delta Electricity is expected to spend $143M.

Eraring Energy is expected to spend $73M.

7. Information and communications technology

The Government Chief Information Office has been allocated $73M in 2006/07.

Key features include funding for:

  1. the State Broadband Service
  2. the Government Radio Network
  3. the long term radio strategy
  4. the Government Licensing System
  5. the Mobile Data Radio Strategy

Greater detail on the Government’s ICT allocations will be made available in the ICT Strategic Plan “to be released shortly”.

8. Attorney-General’s

A range of initiatives were announced to support court efficiencies, including:

  1. $123M for new courthouses and upgrades
  2. high-tech security upgrades at more than 20 courts
  3. $7M for a new high-tech computer network
  4. refurbishment of the King Street Court complex
  5. a new trial court at Nowra Courthouse

The State Infrastructure Plan last week outlined:

  1. $330M for the Parramatta Justice Precinct
  2. plans for a potential PFP to provide new court facilities

New allocations and/or service enhancements in 2006-07 include:

  1. $21.3M on information technology upgrade ($93M over 4 years)
  2. $3.8M for 6 new police stations ($81M over 4 years)
  3. $75M for Parramatta Justice Precinct ($141M over 3 years)