NSW budget deficit blows out to almost $20 billion

The NSW budget deficit has blown out to almost $20 billion after the long winter lockdown,but Treasurer Matt Kean says the state is still forecast to return to surplus within three years.

While the historic deficit has more than doubled since theJune state budget to $19.5 billion,Mr Kean said the impact of the Delta outbreak on the state’s coffers is expected to be largely contained to this financial year.

NSW Premier Dominic Perrottet and Treasurer Matt Kean.

NSW Premier Dominic Perrottet and Treasurer Matt Kean.Nick Moir

The newly appointed Treasurer – who will deliver the 2021-22 half-yearly review on Thursday – said the economy was showing signs of a strong rebound,with the budget tipped to return to surplus by 2024-25 as was forecast in June.

“Our support measures,combined with the resilience,creativity and determination of our people and businesses,meant the state’s economic contraction was smaller this year than it was in 2020,despite a greater level of restriction in place,” Mr Kean said.

The Treasurer pointed to the state’s rebound out of the 2021 lockdown to explain why he believes the economy can handle further challenges over coming months,as COVID-19 cases surge with the new Omicron strain taking hold across Sydney and parts of NSW.

“The last two years have taught us that we’ve got to be prepared for anything. The NSW government has got the right policies and contingencies in place to deal with whatever challenges the new variant throws at us in the days and weeks ahead,” Mr Kean said.

“COVID-19 is unpredictable,but we have demonstrated that we have the fiscal firepower to respond when needed.”

While the government still forecasts a return to surplus by 2024-25,the bigger than expected deficit this financial year will add to state debt which has risen rapidly since the onset of the pandemic.

In the June budget,net debt was forecast to reach $104 billion by 2024-25. The NSW budget deficit for this financial year is almost four times more than forecast a year ago.

Then-treasurer Dominic Perrottet declared “NSW is back” in June,with GST receipts,stamp duty and payroll tax having contributed to the budget’s stronger-than-expected turn-around.

Less than a week later Sydney was thrust into a three-month lockdown as the Delta variant spread,with the government paying out $7 billion in JobSaver payments to more than 200,000 businesses.

Mr Kean said the state had been pushed further into the red by significant health,social and economic measures undertaken by the government during the Delta outbreak. About $45 billion has been spent on those areas since March 2020,according to government figures.

“Growth in jobs has resumed and vacancies are higher than pre-pandemic levels. Economic activity and employment are projected to rebound back above pre-Delta outbreak levels in the March quarter 2022,” he said.

“As a result,we have seen strong rebounds in consumer confidence and business confidence,which are helping to drive a rebound in the state’s economy.”

Mr Perrottet in September revealed that the Delta lockdown would push the budget deficit past $18 billion,with a two-week ban on the construction industry costing the state abouthalf a billion dollars.

The Premier has since described the construction ban as a mistake,and saidNSW “should have kept going”.

Improving women’s economic opportunities,increasing homeownership and boosting the state’s clean energy supply are among reform opportunities the government is set to explore,Mr Kean said.

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Tom Rabe is the WA political correspondent,based in Perth.

Matt Wade is a senior economics writer at The Sydney Morning Herald.

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