Scottish-born economist - Angus Deaton - recently published his new book - An Immigrant Economist…
I wrote the following for the local Fairfax press and it covers my reaction to today’s NSW state budget. I had 500 words and so the arguments are not well developed. It will be largely of local interest and I am posting it here for the records.
The NSW economy is in better shape than its politics. It is growing faster than the national average and has defied earlier forecasts of contraction.
This has allowed the property market to remain strong, and the State treasury is reaping the stamp duty harvest. Further, better than expected employment growth has delivered strong payroll tax receipts.
Together they have given the NSW Government a surplus in 2009-10 of $101 million, a stunning turnaround on last December’s forecasts of a $1 billion deficit.
With economic growth predicted to be 3.75 per cent this year, you might think the State government is handling the economy well. The fact is that these improvements have been the result of national trends rather than State government foresight.
This budget is fairly non-descript and the impression is that the government is reserving some “funds” for the coming election campaign.
The cuts in payroll taxes can be seen in two ways. Proponents, including the NSW Business Chamber, say the cuts boost employment boost and want further cuts to match the lower rates in Queensland and Victoria.
However, there is no real evidence that payroll taxes damage employment prospects when the economy is growing. Further, state governments should not further restrict their already narrow tax bases. This will constrain their future spending options.
The Budget recognises the housing crisis, which has been the result of past policy mistakes. The zero stamp duty initiative will create incentives to free up larger family homes and build new affordable dwellings.
The ambitious infrastructure program is continuing and further funds will help our region in terms of improving our amenities, cutting costs for businesses and increasing employment. A number of projects will benefit from this funding including the Hunter expressway, the inner city bypass as Shortland, Newcastle Justice Precinct, the stadium, Newcastle port, and James Fletcher hospital.
There are several negatives in the Budget. The Government is continuing to pursue privatisation, including our electricity assets. When will they learn that there are no gains to be made in the long run by privatising revenue-generating assets?
With more than 40 per cent of all unemployed people in NSW under 25 years of age, it is disappointing that more attention wasn’t given to creating job opportunities with training paths.
Property developers face lower council charges, which will further encourage development that often is not well considered nor in the interests of local communities. Related to this concern, is the lack of any real public transport strategy and the juxtaposition between public transport and property development will be a burning issue in our town in the coming year.
The tax cuts on poker machines will further encourage gambling.
The cynics are noting that the pubs and property developers provide generous financial support to NSW Labour.
The Government also clearly signalled they see a future in clean coal technology. I think this is a myopic strategy and much more should have been allocated to renewable energy investment.
Overall, the Budget will provide some boost to employment but lacks any exciting vision.