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NSW tipped to stay in red as dark economic clouds hover SMH - Alexandra Smith and Michael McGowan - June 20, 2023
Mookhey’s economic statement to NSW parliament on Tuesday painted a gloomy picture for the state’s finances, with the treasurer warning that the state had lurched from a once-in-a-generation pandemic into a once-in-a-generation cost of living crisis. NSW Treasurer Daniel Mookhey has delivered his first major economic update to the parliament. “There are tough choices ahead, they will not be easy, but they cannot be avoided,” Mookhey said. “The Treasury thinks inflation will remain NSW’s preeminent economic trial. This government acknowledges we can do more. The next step in bringing inflation under control is to bring our own spending under control.” Mookhey said NSW Treasury this week provided him with the results of its early analysis of the state’s balance sheet, which would see the budget’s deficit “deteriorate further”. NSW budget The three reasons the NSW treasurer is so gloomy Speaking ahead of his statement to parliament, Mookhey confirmed that a budget surplus in 2024-25, as forecast by former treasurer Matt Kean earlier this year, was highly unlikely. “It’s going to be very, very hard to hit those figures,” Mookhey said. “Those figures have been based on assumptions which are not valid and equally under pressure, so I want to be upfront with the fact that returning the budget to surplus is very, very difficult.” Kean’s half-yearly budget update, delivered a month before the March 25 poll, revealed the state’s deficit had increased $102 million to $11.4 billion since June. The budget review warned the global economic landscape was very challenging and that the outlook for the state “remains subject to a high degree of uncertainty and risk”. Despite this, Kean was adamant a re-elected Coalition government would return the budget to surplus in 2024-25. Mookhey said a major factor behind the worsening deficit was a need to re-evaluate the state’s assets. “They [Treasury] pointed out the looming need to revalue the state’s non-financial assets to the tune of more than $30 billion,” Mookhey told parliament. “This means that high inflation is making it more expensive to replace all the state’s roads, schools and hospitals, and the other assets we depend on to deliver the essential services.” Treasury Daniel Mookhey painted a gloomy picture for the state’s finances. He also warned that by June 2026, NSW would owe creditors a total of $188 billion, which would equate to $7 billion in annual interest payments – the equivalent to funding the NSW Police Force. “This is the largest debt any incoming state government has inherited from its predecessor in more than three decades,” Mookhey said. “More money spent on interest bills leaves us with less money for vital public services like our schools and hospitals.” He said some increase in borrowings could be blamed on the big spending final year of the former Coalition government. NSW budget NSW Treasury warns rating agencies are preparing to downgrade the state’s credit rating “That’s when the then government chose to accelerate spending. They added $33.9 billion of expenses over the forward estimates over just 14 months,” Mookhey said. “No government of any political persuasion has spent faster than they did in living memory – except in times of war or emergency.” Mookhey said he would not be detailing spending cuts in the economic statement but has already announced a slimming down of the popular Active Kids voucher program from July 1, when it will be means tested and reduced from $100 per child to $50. He also warned of a real threat to NSW retaining its AAA credit rating amid increasing debt. The government has flagged $7 billion in “difficult to avoid” budget pressures including a shortfall in funding for out-of-home care for children. But NSW Opposition Leader Mark Speakman labelled Labor’s so-called black hole a “myth”, accusing the government of “aiding and abetting” increased inflation and a “price wage spiral” by offering public sector workers a 4 per cent pay increase. “The only thing that has happened since March, in terms of a change of circumstances, is this government losing control of the budget because they can’t fund the public sector wages increases,” Speakman said. Mookhey delivered his statement to the Legislative Council in lieu of a full budget, which is traditionally handed down this week but has instead been delayed to September. |
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