NSW Chamber of Commerce Response to 2009-2010 NSW State Budget

NSW’s largest business organisation, NSW Business Chamber has said the 2009-10 Budget has highlighted the precarious position of the NSW economy and the need for a stronger focus by the NSW Government on its own performance.

“The Government has had to balance the precarious economic position of the State with the need to be fiscally responsible,” said Kevin MacDonald, CEO of NSW Business Chamber.

“The NSW economy is in a precarious position – with NSW Treasury indicating negative economic growth and a significant rise in unemployment over the coming two years,

“The shift of the Budget position into deficit and the $14 billion blow out in unfunded superannuation liabilities is a cause of great concern.

“The clear challenge for the Government is to deliver on the policy goals outlined in the budget to deliver productivity gains – namely, the 1% efficiency dividend from Government agencies, the restructure of government into 13 Departments and the cap on public sector wages growth. 

“Only time will tell if these commitments will be sufficient to achieve the competing objectives of growth and responsibility.  History has shown that the Government does not have a strong record for implementing its commitments.  In past years, good policies such as the State Plan, electricity privatisation and OH&S harmonisation, have either fizzled out or have been shelved following Union pressure.’

Mr MacDonald said the decisions within the Budget to support job creation within the private sector were well targeted.

“The Government is continuing to implement its payroll tax reduction plan which will see the payroll tax rate fall from to 5.5% by 2011.  This is the right decision given the expected contraction of the NSW economy in the coming year.

“The decision to introduce a new Housing Construction Acceleration Plan, the extension of the new first home buyers supplement and an additional $40 million for regional tourism funding will all directly impact and support NSW businesses and jobs.

Mr MacDonald said he expected one of the outcomes of the Budget was a stronger role for the Australian Government in the activities of the NSW Government.

“Commonwealth grants now account for 48% of all State Government revenues up from 42% in 2007-08”.

Mr MacDonald said the NSW Government over the medium term needed to demonstrate a plan to get the liabilities of the State under control.

“The decision of the government to expand its infrastructure program and go into deficit during these difficult economic times is the right one, however, this position should be considered by government to be temporary rather than permanent.  If Treasury estimates are correct and growth returns within 18 months, then the government will have to demonstrate how it will take hold of the State’s financial position, particularly as it relates to the unfunded superannuation liabilities”.

Mr MacDonald said the ultimate assessment of the 2009-10 State Budget will be in the implementation and execution of the Budget’s commitments to improve productivity.

“The Government does not have a good record in delivering on productivity and efficiency improvements within its agencies.  However, the current circumstances are so challenging there is no alternative for NSW than to take on these challenges.  To fail to do so would not only be a dereliction of duty, but risks damaging the economic fundamentals of the State over the medium to long term.”

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.