State Budget

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
At the most basic level a government budget is about two things: revenue and spending. True happiness, as Mr Micawber would say, lies in ensuring that outgoings do not exceed what comes in.
Under that definition NSW treasurer Gladys Berejiklian would be very happy today, having handed down a budget with a surplus of $3.4 billion this financial year (and $3.7 billion over 2016-2017), as well as forecasts of surpluses (albeit slimmer) in the forward estimate years ending 2019-20. And this feeling may well spill over to the Federal Coalition in coming election.
The results, mainly off stamp duties received from residential property and its participation in the federal government’s asset recycling incentive program, which rewards it for investment in infrastructure and privatisation of state assets, sees the state’s debt drop to just .01% of Gross State Product, backing her claim six months ago that NSW was debt free for the first time in 20 years.
It’s not all good news, with Berejiklian noting NSW would lose GST payments from the Commonwealth by some $850 million, equating to $10.8 billion in lost revenue by 2019-20.
State governments are technically sovereign on their spheres of competence but in the real world they are highly dependent on the commonwealth government because of vertical fiscal imbalance. They cannot do what they have to do without a regular influx of money from the Commonwealth government. This constrains their freedom of action.
Berejiklian, claimed that this was a function of the success of the NSW economy and government financial management which perhaps only underlines some of the perversities of Australian federalism in action.
The NSW state government has claimed $3.4 billion dollar surplus for 2015-16 and says that it will deliver surpluses of about $2 billion a year for the next four years. However, it was recently reported that there could be a $17 billion “black hole" in future budgets over the next few decades.
One issue is that state revenue quite dependent on the property market and its capacity to deliver stamp duty. The capacity of NSW by itself as with all the states to raise revenue is limited. This is why state finances are vulnerable to the up and downs of the property market.
Given that the boom in the construction of apartments appears to be coming to an end this may mean the NSW’s capacity to remain “debt free” is very limited. This is perhaps why Mike Baird at the beginning of 2016 was such a vocal supporter of an increase of the rate of taxation imposed for the GST.
In this context, two of the taxation measures in the budget are interesting. One is the imposition of an additional stamp duty and land tax for foreign investors.
The other is the reduction of certain types of duty for business. Both of these resonate with the federal election, the desire to make those from elsewhere pay tax and the reduction in company tax by the Liberals.
Both of these measures indicate important aspects of any Liberal strategy; on the one hand the need to raise money in a way that does not impose on voters, on the other hand a desire to lift the taxation burden on business so that it can flourish, create jobs and create more revenue through other forms of taxation.
Another theme which resonates with the federal situation is that the treasurer has also indicated her desire to cut government costs through an efficiency dividend. This is something that her federal counterpart seems reluctant to do, although as Opposition member Ryan Park has suggested, such savings in public service spending have to be balanced against increased spending on consultants.
At the moment NSW is performing well economically, which will help the federal Liberal Party in its quest to be returned to office. Therefore a steady as she goes budget, even if it is at a time when the property boom is winding down, seems appropriate. The absence of nasties, especially in the context of “no debt”, creates a mood of confidence and prevents the fostering of any real grievances amongst the ordinary voter which could express itself in the federal election.
Moreover, the announcement of increased funding for both education and roads, both issues which resonate in Western Sydney, will help the Liberal Party in crucial marginal seats in that area.
The real issue with such a budget relates to those things which are not being discussed a lot. In the longer term NSW, like all the states, faces massive costs, especially areas related to an ageing population and health. As with education, these are things which the state can afford to pay for without assistance from the Commonwealth government.
In this regard, the real issue is how rising health costs will be funded over the next decade. As Stephen Duckett has pointed out neither party at the federal level has proposed “any plan for funding hospital cost growth beyond 2020”.
The federal election campaign has said a lot about spending but there has been little indication how the very real problems facing Australia as it moves close to the third decade of the century will be funded. There is a certain air of unreality that somehow we will, like the British, “muddle through” so that everything will work out. For the moment everything is in a holding position.
One gets a similar feeling about the NSW budget. There is the afterglow of a property boom which has done wonders for government finances. But there are also storm clouds on the horizon. Receipts from stamp duty can only go in one direction. The state is losing a good amount of its GST revenue. In the longer term real problems funding both health and education threaten.
But a state government can only do so much. It remains dependent on Commonwealth money. The real challenges over the next few years will be to re-negotiate the federal compact, a task begun by Tony Abbott, and to find ways of ensuring that health costs can be funded and do not weigh down the public purse.
In the meantime, both the Federal Government and the Government of New South Wales enjoy a bit of an Indian Summer, the calm before the storm. From that perspective one should expect a good showing by the Liberal Party at the coming Federal elections in NSW. The worrying thing is that they might not be doing enough to prepare for the storm.
Gregory Melleuish is associate professor, School of History and Politics, University of Wollongong and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gregory-melleuish-8479" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

NSW budget delivers a fat surplus, but mixed bag for Turnbull’s chances

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The WA state government has missed an opportunity to address the state's inefficient property tax system according to Warwick Hemsley, Chairman of QWest Paterson Valuers and Property Consultants. 
He said the state government has not addressed steeply rising marginal rates of stamp duty and land tax that continue to be a thorn in the property industry’s side adding many studies have shown that stamp duty is an inefficient tax that only targets a specific sector of the market.. 
“The added cost of stamp duty is a disincentive to downsize for seniors, a disincentive for workers to move homes if they want to be closer to their employment and is an added cost burden to people going through a divorce or separation that need to purchase a new home,” he said. 
“We understand that the government is experiencing a tight fiscal situation however we mustn’t underestimate the importance of having a vibrant city and invest in the future of Perth. 
“While significant money has been set aside in the budget for infrastructure including road and transport projects it is also important to invest in the arts and lifestyle infrastructure in order to retain and attract creative and smart people that add to the cultural fabric of our state.
“For example, initiatives such as MONA in Hobart has transformed visitation to that city and so too has the National ANZAC Centre in the regional WA town of Albany. 
“There is a well-documented payback on this type of investment. Confirmation of funding for the new museum complex in Perth is important.” 
“We live in a highly mobile world and we need to ensure our capital city is a vibrant and creative place. In today’s world, our best and brightest have many other options so we are competing with many other cities around the globe."
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po-LsXgBTHBmX

WA state government fails to address property tax issues

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Investment property owners in Western Australia may need to pay a $270 tax under a plan by the McGowan government.
It has been reported the proposed levy will be linked to water rates and applied to investment properties with a gross rental value of $24,000 or more.
PerthNow reported a spokesman for Treasurer Ben Wyatt saying all options are being considered as part of the Budget repair process and any announcements regarding household fees and charges will be before July 1.
He told Parliament yesterday the government had made a range of savings measures.
“I must admit I’m not enjoying making them, but the reality is everyone has to contribute and everybody will be looked to to contribute,” he said.
“For example, tariffs, fees and charges need to be announced prior to their implementation on July .
“I will be looking to all organisations and individuals in the community to help ... In terms of specific impacts on specific taxpayers, you’ll have to wait for the Budget.”
Premier Mark McGowan said tough decisions had to be made.
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jonathanchancellor-7SQnKwU6yx

WA investment property owners may be hit with new levy

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The abolition of the off-the-plan transfer duty concession deferral scheme for residential investors in the NSW State Budget will recoup $380 million in a one off annual fillip next financial year.
Investors will then pay another $110 million in 2018-19 ahead of schedule, the NSW treasury papers indicate.
The OTP stamp duty was always going to be paid by investors, but the decision brings forward its payment.
The concession for residential off-the-plan purchases, which allowed for a delay of up to 12 months in the payment of duty, has been amended to allow the government's focus on first home buyers.
The state's finances continue to benefit from Sydney's property boom.
The Government will reap $6.8 billion in residential stamp duty revenue in 2016–17, an increase of almost 10 per cent on the previous year, thanks in part to the strong performance of Sydney's property market.
All the big property decisions were actually announced before today's budget.
The doubling of the foreign investor from four per cent to eight per cent on stamp duty and a rise from 0.75 per cent to 2 per cent on foreigner land tax is forecast to secure $180 million in its first year.
Privatisations have turbocharged NSW finances, with Treasurer Dominic Perrottet announcing a surplus when he delivered his first budget today.
He describing his first state budget as "the envy of the western world."
"Surpluses shield us from difficulties and challenges that may lie ahead. We're [forecasting] 75,000 new homes in the next 12 months; we are about to embark on a housing construction boom," said Mr Perrottet when asked about his level of confidence against the backdrop of a housing crash speculation.
With much foreshadowed, the biggest new announcement on Tuesday was spending on hospitals, with $720 million to upgrade the Prince of Wales Hospital at Randwick.
It added to $632 million for the Campbelltown Hospital, $534 million for Tweed Hospital; $576 million for Nepean Hospital; and $341 million for Concord Hospital that had all been previously announced.
Stamp duty revenues are still edging towards $10 billion annually for the ever increasing property tax-dependent NSW State Government coffers.
Residential stamp duty was up 9.6 percent in the current financial year to $6.8 billion, and will ease to 5.9 percent growth next financial year. Treasurer Perrottet expects transfer duty revenue to continue increasing but at a slower growth rate - down to 4.2 per cent by the 2020-21 financial year. Total transfer duties sit at $9.6 billion.
The budget confirmed first home buyers in New South Wales will be able to buy property up to $650,000 without having to pay stamp duty. 
The policy, which will apply to new and existing homes, will start from July 1 in an attempt to combat the housing affordability issue by the NSW State Government. It will cost $187 million next financial year rising to $310 million in 2019.
The cap had previously been set at $550,000 for first home buyers on  new homes.
Homes up to $800,000 will also see a discounted stamp duty.
Up to $34,360 will be saved under the package, according to the government.
The budget papers reveal that property development companies that are foreign-owned but based in Australia will not be taxed as foreigners  and will be eligible for a refund if they sell their developed properties within five years.
The budget papers confirm the 2016-17 surplus is $856.9 million higher than forecast in last year's budget, largely to stamp duty revenues from the part-privatisation of electricity companies Ausgrid and Endeavour Energy.
The NSW Government will spend more than $720 million over the next four years to address the key issue of housing affordability.
“Our number one priority as a government is to get more houses built and to market to help make new homes more affordable,” Minister for Planning and Housing, Anthony Roberts said.
“We are working on many fronts to make owning a home a reality for more people, by streamlining and simplifying the planning system so housing approvals can be fast-tracked and are continuing to release and rezone more land.
The 2017-18 NSW Budget includes $117.8 million over four years of new investment to deliver infrastructure, housing and employment initiatives, review land use and infrastructure strategies for priority growth areas and implement regional plans.
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Property investors lose out in NSW State Budget

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John McGrath has raised the spectre that the NSW State Budget stamp duty cuts and grants for young buyers will "ultimately raise property prices due to higher competition."
But with Sydney and Melbourne at their peak pricing, McGrath suggests softening market conditions might balance out any price effect from greater first home buying activity.
'Especially if there are fewer investors in the market due to tighter lending restrictions," McGrath told his Switzer readers.
CoreLogic quoted recent ABS statistics showing that first home buyer activity in NSW hit a record low of 7.5 percent of new owner occupier mortgages last September and had increased only marginally since then to 8 percent in March this year.
"The long term average is 17 percent, so we’re a long way off that," McGrath said.
McGrath added he was concerned by the good initiative be funded largely by disincentivising investor activity and foreign ownership.
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j.ballantyne1990-6AQqhLzZaK

John McGrath thinks NSW FHB incentives will assist in balancing property market

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EXPERT OBSERVATION
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It is a huge disappointment that the NSW Government has failed to address stamp duty rates in today’s budget, which have been left unchanged for the last 32 years. 
The government collected $8.673 billion in stamp duty, $1 billion less than 2016-17. 
The number of transactions has fallen and will continue to fall because people aren’t buying and selling real estate.
The Budget forecasts $6 billion less than previously budgeted in stamp duty over the next four years but an increase by $407.6 million in land tax from stronger forecasts for land values.
Taxation is driving the market into the ground. It is fiscally naive, irresponsible and unconscionable not to reduce the stamp duty rates. 
There is empirical evidence that shows reducing taxation will increase the number of transactions and therefore it is a win – win. Government will get additional revenue and the consumer will get a more affordable product. 
The government can save a lot of time and money consulting the community on how to solve housing affordability - the answer to affordability is increasing supply and reducing property taxes. 
After it has all been said and done there has been more that has been said than done. We need action not words.
Albert Einstein said ‘insanity is doing the same thing over and over again and expecting different results’. Persisting with outdated stamp duty rates and impediments to supply will not improve affordability. 
Government continues to over tax the property market and then says they will look at affordability, and then don’t understand why things aren’t improving.
It’s time to conduct a full review of property taxes, in particular stamp duty brackets, and make a real change.
Tim McKibbin is the CEO of REINSW.
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jrobinson-rf4aSBido9

NSW Budget fails home buyers: REINSW

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EXPERT OBSERVER
The Victorian Budget 19/20 has been adjusted to deal with the biggest write down in revenue in Victoria’s history. 
This is due to the challenging headwinds for Victoria’s property market with sales volumes down 24 per cent and cooling values as we have seen over the past year. 
Victoria’s property industry remains the cornerstone of the Victorian Budget, continuing to contribute 46 per cent of revenue and $10.5 billion in land tax and stamp duty alone in the next financial year.
The Budget delivers on the Government’s bold and ambitious infrastructure investment plan and has addressed many of the priorities outlined in the REIV’s Election Platform and Budget Submission. 
In particular, the REIV welcomes the payroll tax relief for small business and commends the Government for adjusting the rates in Regional Victoria so that by 2022/23 regional businesses will pay the lowest payroll tax in the nation.
The Victorian Government will invest $2.6b to support jobs, economies and communities in Regional Victoria and an additional $150m in the next financial year to establish the Victorian Jobs and Investment Fund. 
The REIV is also pleased with the investment in new urban growth corridors and precinct plans which we have consistently advocated for.
Included in this is $173m for the Geelong City Deal and an additional $18.8m for services.
We welcome the Fishermen’s Bend Framework which includes homes for 80,000 people and the investment in the innovation and employment clusters in Sunshine, Monash, Dandenong, LaTrobe and Werribee.
The Government has also committed $50m for the Growing Suburbs Fund to build and upgrade new community facilities in Melbourne’s 10 rapidly-developing interface municipalities. 
The REIV commends the Government for its commitment to education and training with historic expenditure in the sector.
We will work with the relevant bodies to ensure the ongoing professionalism and upskilling of our industry which was a fundamental tenet of the REIV’s Budget Submission. 
We also welcome the $2.5m support for mentoring for small business.
Other noteworthy initiatives include the extension of the Better Apartments program to the suburbs, the expansion of solar homes and the 50 per cent discount on land transfer duty for commercial and industrial properties in Regional Victoria in four year’s time.
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The Budget is still heavily reliant on property taxes. 
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While we congratulate the Victorian Government on many positive initiatives, the reliance on property taxes is of great concern to our industry.
We appreciate the government has a big infrastructure agenda, but they can’t keep dipping into the same revenue pot to fund their promises. 
The REIV and the industry predicted the property market correction and planned accordingly, but it seems the government did not. 
Robyn Waters is the president of the REIV.
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Victorian Budget delivers infrastructure and incentives

Queensland budgets hits property owners with higher taxes

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Prospective house buyers were one of the winners in the South Australian budget for 2019 announced on Tuesday.
The State Government will create a $104.5 million housing stimulus package to support construction and low-income earners.
The package includes an interest-free deposit gap loan of up to $10,000, funded via an Affordable Housing Fund of $2 million.
The fund is to be administered by HomeStart and will be available from September 1 for two years.
The package also includes $21.4 million for the South Australia Housing Authority to undertake a housing construction program in 2019-20 and 2020-21 to build about 90 homes.
The government will also remove a tax loophole that currently allows investors with multiple properties to pay little or no land tax.
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<div class="styles__Container-sc-1ylecsg-0 goULFa">The change, to come in to effect in July 2020, is expected to yield around $40 million a year.</div>
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<div class="styles__Container-sc-1ylecsg-0 goULFa">The government will levy tax according to an owner's interest in every piece of land rather than the properties held within the same ownership structure, such as a company or family trust.</div>
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<div class="styles__Container-sc-1ylecsg-0 goULFa">Treasurer Rob Lucas says the loophole wasn't fair on others.</div>
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<div class="styles__Container-sc-1ylecsg-0 goULFa">"This measure is aimed squarely at closing a loophole that may encourage some landowners to form complex ownership structures designed purely to avoid paying tax," Lucas said.</div>
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<div class="styles__Container-sc-1ylecsg-0 goULFa">"We don't think that's fair and we will be introducing a model that works well interstate."</div>
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Home buyers winners in South Australia budget

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Late last week the State Government and the AFL announced a $225m allocation in the 2018/19 budget that will facilitate a major redevelopment of the Etihad Stadium Sporting and Entertainment Precinct.

This forms part of a $500m package to retain the AFL Grand Final at the MCG for the next 40 years, support grassroots football and the growing women's competitions through upgrades to local community grounds and suburban stadiums.

The Etihad Stadium upgrade will deliver upgrades for rectangular sports like soccer and rugby, improve women's change facilities and guarantees access for other codes and major events. Developed over the last two-years, the redevelopment will see AFL House demolished and replaced with a multi-storey building with improved connections to the waterfront and surrounding precinct.

The plans will be further developed and refined over the next 12-18 months, according to the AFL with works not likely to commence until 2020.

<blockquote>
We have made a committment to the government that it is a venue that is open for all sports and we've committed to that for 30 years. We have always had that attitude and this is now contractually guaranteed.

We want to open up Etihad Stadium, have a better venue and better destination and open up the precinct.

- AFL Chief Executive Gillon McLachlan
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<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/etihad_inline_image.png" rel="gallery-all" title="Artist's impression of what an Etihad Stadium upgrade might look like. Image: AFL"><img alt="" class="image-article-full-width-580px" height="329" src="/sites/urban.melbourne/files/styles/article_full_width_580px/public/pictures/article-images/etihad_inline_image.png?itok=6UP4UM3Y" title="Artist's impression of what an Etihad Stadium upgrade might look like. Image: AFL" width="580"></a>

<figcaption>Artist's impression of what an Etihad Stadium upgrade might look like. Image: AFL</figcaption></figure><h2>What does this mean for Docklands?</h2>

Originally breaking the story on the Footy Show, host and Collingwood President Eddie McGuire spoke about the desire to better integrate the stadium with the Docklands precinct and improve connections for visitors arriving from Southern Cross Station, with the possibility that not only would the works encapsulate AFL House but also Channel 7's digital studios.

The details of this have yet to be confirmed.

Unlike most stadiums around the world, Etihad Stadium (originally Colonial Stadium) was always envisaged as an urban stadium acting as a catalyst for the redevelopment of the former docks, with its four 'corners' eventually developing over time to fill out and assist in achieving the vision for a 24/7 precinct. 

It can be argued that the Stadium Precinct hasn't quite reached its true potential with opportunity for the stadium itself to offer more on non-event days and contribute to the activity and liveliness of the area.

Development of the remaining two parcels will go some way to improving and contributing to the area, with developments by AZX Group and Salta Properties injecting further residential and hotel program into the precinct at their 685 and 695 LaTrobe Street sites.

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/685_latrobe_street.jpg" rel="gallery-all" title="685 LaTrobe Street and 695-699 LaTrobe Street. Images : AZX Group &amp; Salta Properties"><img alt="" class="image-article-full-width-580px" height="177" src="/sites/urban.melbourne/files/styles/article_full_width_580px/public/pictures/article-images/685_latrobe_street.jpg?itok=BmMoPIA8" title="685 LaTrobe Street and 695-699 LaTrobe Street. Images : AZX Group &amp; Salta Properties" width="580"></a>

<figcaption>685 LaTrobe Street and 695-699 LaTrobe Street. Images : AZX Group &amp; Salta Properties</figcaption></figure>Most critically, however, in the mind of this author is the redevelopment of Harbour Esplanade and whether any funding from the State Government and/or AFL will be allocated to finally get this key project realised, after a number of false starts over the years. 

You can read more about the now approved Master Plan for Harbour Esplanade devised by Hassell <a href="https://urban.melbourne/planning/2015/04/29/places-victoria-moves-ahead-harbour-esplanade">here</a> and <a href="https://urban.melbourne/design/2014/12/12/places-victoria-submits-harbour-esplanade-masterplan">here</a>.

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/harbour_esplanade_summary_0.jpg" rel="gallery-all" title="Harbour Esplanade Master Plan Overview. Image: Hassell"><img alt="" class="image-article-full-width-580px" height="375" src="/sites/urban.melbourne/files/styles/article_full_width_580px/public/pictures/article-images/harbour_esplanade_summary_0.jpg?itok=OE9EWTro" title="Harbour Esplanade Master Plan Overview. Image: Hassell" width="580"></a>

<figcaption>Harbour Esplanade Master Plan Overview. Image: Hassell</figcaption></figure>
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