NSW State Budget Review
19 September, 2023

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Committee for Sydney

Statement / 19 September 2023

NSW State Budget Review

Treasurer Mookhey has made it clear since coming to government in March this would be a tough budget in the face of significant fiscal constraints and clear election commitments requiring new funding.

The majority of changes in this budget are aimed at two objectives: reducing deficits and delivering on election commitments. On these two fronts, the government has delivered.

To achieve these objectives, the budget isn’t as ruthless as expected, with cuts being modest in comparison with the Treasurer’s rhetoric. The other side of the coin is this budget is also modest in providing downpayments on critical challenges for the state.
The investment in housing is modest – at a time when chronic unaffordable housing is costing Sydney $10 billion a year, this budget is unlikely to make material inroads on this challenge.

The budget makes a significant investment in the energy transition effort, which will put our target of reducing carbon emissions by 50% by 2030 back on track.

The good news is the NSW Government gets two more chances in the next nine months to make further investments in these areas – it’s likely this budget is aiming to set the government up for a more proactive mid-year review and second-year budget in June 2024.

Budget at a glance

The good:

  • $1.8bn investment in the energy transition, including $1bn for the Energy Security Corporation which will invest in critical areas like community batteries
  • $3.6bn investment in pay-rises for essential service workers and continued investment in early childhood education and care will help deliver better equity for our city
  • Continued investment in public and active transport infrastructure, including almost $25bn for Metro, an additional $200m for Parramatta Light Rail Stage 2 an additional $60m for active transport, $300m for rapid bus transit to Western Sydney Airport and $300m to make stations accessible and safe.

The ‘more to do, but heading in the right direction’:

  • Investment in government-led housing, including $300m for Landcom to deliver almost 5,000 affordable and private homes over the next 16 years
  • $300m for Sydney from the Housing Infrastructure Fund to deliver enabling infrastructure and unlock housing supply.

The bad:

  • The budget confirms the $560m Toll Cap program will be used by 700,000 people across Sydney, which will increase traffic without delivering a clear economic benefit while not being targeted to those that most need cost of living relief.
  • Cuts to the Future Economy Fund of up to $250m mean less investment in cutting-edge technologies and innovation.

Looking at the budget through the lens of the Committee for Sydney’s priorities

Planning and housing

Increased funding for Landcom, LAHC and the Housing Infrastructure Fund is a clear signal that this budget is focused on levers government can pull themselves to unlock housing supply, particularly in circumstances where the private market may be sluggish (like affordable and social housing). This is a great start, but the figures fall short of addressing the $10 billion economic burden chronically unaffordable housing has on our city, paling in comparison to efforts of other global cities, such as Vancouver’s $7 billion spend on social, affordable and market housing.

  • $610 million from the Australian Government to deliver 1,500 social homes over the next five years
  • $300m to enable Landcom to deliver an additional 1,409 affordable homes and 3,288 market homes to 2040. This in addition to the $60m Landcom is receiving to pilot BTR in Regional NSW
  • More funding for LAHC, including $35m to support critical maintenance of state-owned social homes and $10m to pilot the delivery of modular social homes
  • $400m set aside for the Housing Infrastructure Fund of which $300m reserved for Sydney
  • $9.1m allocated to assess housing supply opportunities across government-owned sites with 30% of surplus government land to be set aside for social, affordable and universal housing
  • The budget also includes modest funding for the ‘faster planning program’ which includes $24m to establish a NSW Building Commission to support high quality housing and $5.6m for an artificial intelligence pilot to deliver planning system efficiencies.

What should be done next:

  • At least triple the current investment in social, affordable and market housing: It’s clear that a constrained first budget has limited the extent to which funding can deliver the social, affordable and market housing at the scale we urgently need. The current investment falls far short of funding invested in other global cities experiencing the housing challenge.
  • The Planning system will need to do the bulk of the heavy lifting for NSW to meet the 75,000 homes a year target with existing resources. We’ll be keeping a close eye on future planning and housing policies that will increase the number of homes built around transport, schools, hospitals and greenspace nodes, many of which have been funded in this budget.
Climate and Resilience

Finally, recognition that Sydney’s world leading rooftop solar, combined with battery storage at household and community scale, are critical to both accelerating the energy transition and enhancing equity in the process. New funding for the NSW Reconstruction Authority also recognises the need to properly fund preparedness, and invest in planning for disasters with communities.

  • Coal royalty rates will increase from 1 July 2024, raising $2.7b over the four years to 2027 – 28
  • Establishing the $1bn Energy Security Corporation to make investments in storage projects, and an additional $804m for Renewable Energy Zones
  • $121m investment in NSW Reconstruction Authority, to fund the development of a State Hazard Mitigation Plan, local Disaster Adaptation Plans, and post-disaster clean up.

What should be done next:

The Government should set battery storage targets to enable growing residential and commercial rooftop solar to benefit the community and the grid, and drive investment in storage where it is most needed. The more of Sydney’s electricity demand that can be met by rooftop solar and batteries, the less additional electricity needs to be brought in from large scale energy generators, reducing costs and creating more opportunity to share that energy with those who can most benefit most.

  • Reduce future disaster risk by stopping new homes in flood and bushfire zones. The work of the NSW Reconstruction Authority needs to influence land use planning, with hazard risk mapping being embedded in the forthcoming Sydney Region and City Plans, for example through a high and medium flood risk overlay, that also considers projected future climate risk across Greater Sydney
  • Engage with communities to share hazard risk information understand their risk appetite. Preparing plans to reduce the impact of floods and other disasters will require trade-offs between and within communities, and decisions by service providers about when and how to invest. Approaching these essential challenges needs to be led by the NSW Reconstruction Authority in order to actually shift the balance of funding away from recovery towards preparedness and prevention.

In contrast to the rhetoric leading up to the budget of transport infrastructure cuts, this budget has delivered funding across key areas of public and active transport need.

  • Increased funding for active transport: additional $60m to enable councils to expand cycleway networks and expand opportunities for walking, including in greenfield areas in Western Sydney
  • Charging on with Metro and Parramatta Light Rail stage 2: an additional $200m for the Parramatta Light Rail; $13.7bn for Metro West, $3.3bn for Metro South-West and $7.9bn for Sydney Metro – Western Sydney Airport
  • Investment in the Western Sydney Rapid Bus Network: $302.7m reserved for a Western Sydney Rapid Bus Network to connect Penrith, Liverpool and Campbelltown to the future Western Sydney International Airport
  • More inclusive, safe and secure access to public transport: $300m to expand the Transport Access Program to upgrade train stations and commuter car parks to make them more accessible, safe, and secure. This will make public transport more accessible for people with disability or limited mobility, and parents with prams
  • Reducing the toll multiplier for trucks on the M5 East and M8: The budget reduces the cost of tolls on these underground motorways by 33%, with the aim to reduce the number of trucks using the surface roads through the area
  • $263.5m for EV charging infrastructure, targeting regional areas, renters and people who live in apartments, and people who don’t have access to home charging
  • Phasing out the $3000 electric vehicle incentive scheme by 1 January 2024
  • Fast rail budget shelved. While not entirely unexpected, this puts at risk the potential of a genuine six city megaregion to drive Sydney’s competitiveness on a global scale. It’s now critical that the federal government and High Speed Rail Authority step in to fund this critical intergenerational infrastructure
  • $560m for the Toll Cap program, which risks replacing one cost – tolls – with another – traffic. As we discussed in our submission to the NSW Tolling Review, the toll cap. program needs better means-testing and design to deliver a better price and target it at those that don’t have alternatives.

What should be done next:

Reintroduce a means tested EV purchase incentive scheme. Removing the incentive holds a real risk of stalling the momentum that has built up to date in shifting vehicle sales towards electric vehicles, particularly as cheaper EVs enter the market and challenge the mainstream car market. Transport is the most significant contributor to Greater Sydney’s carbon emissions, and reducing road transport emissions are a critical element in achieving our 2030 Net Zero targets.

  • Invest in long-term changes to Sydney’s tolling network – which requires imagination and consideration of the critical role a price-signal on the roads plays in reducing congestion
  • Invest in active transport alongside all major roads and rail projects. The $60m for active transport pales in comparison to the billions allocated to road improvement or widening programs. Future road and rail programs should also include active transport improvements for little additional cost, but significant benefit
  • Investment in active travel to school to complement the funded new schools and pre-schools: More children will me travelling to more schools resulting in more traffic if active travel programs aren’t also considered, there’s a huge opportunity to invest in active travel to school programs around the 100 new preschools, and schools. This will have numerous benefits – supporting healthier lifestyles for kids and their parents, increasing concentration and education outcomes as well as reducing traffic congestion around drop-off and pick-up times.

This budget will not boost a creative sector still reeling from pandemic impacts, but with consultation underway on a new strategy for the sector, coming budgets offer grounds for optimism.

  • $550 million Ultimo Powerhouse Museum rebuild replaced with a $250 million heritage revitalisation, while construction plans for Powerhouse Parramatta and the expanded Museum of Discovery Centre in Castle Hill continue, as do improvements to the Walsh Bay and National Art School precincts
  • More than a dozen arts and cultural programs, incentives and outfits stripped or not reinstated, including ‘Made In NSW’ and ‘Post, Digital and Visual Effects Rebate’ schemes to attract high-end screen production to NSW
  • $41.3m for events including Vivid, Mardi Gras and the Sydney Festival, as well as a rebooted Great Southern Nights Festival
  • $31.2m to fund a year’s initiatives under the new Sound NSW, including a plan to support contemporary music
  • $26.8 million in 2023-24 to support the Office of the 24 Hour Economy Commissioner including its expansion to Wollongong, the Central Coast and Newcastle
  • To encourage families to head to the city’s museums, the government is introducing free general admission at the Australian Museum and Museums of History NSW
  • 30% cut to the state’s primary tourism promoter Destination NSW.

What should be done next:

  • A coordinated strategy to give culture the space and prominence it needs to reinvigorate Sydney and the state
  • Targeted incentives for cultural programming and production, particularly in Uptown and Special Entertainment Precincts
  • A program to improve conditions and career pathways for creatives and skilled staff
  • A one-stop shop/concierge service for creatives engaging with the NSW Government
  • Strategic planning of cultural infrastructure in places of current and future population growth.

The budget saw little in the way of investment into economic transformation – and pre-election announcements related to advanced manufacturing and local employment did not feature heavily. Meanwhile, cuts to existing programs make the challenge to transform our economy harder with existing industry development and innovation programs being reduced.

  • Reallocation of the Future Economy Fund and Regional Investment Attraction Fund: The funds, designed to invest in priority industries, has been cut – potentially by up to $360m – to fund apprenticeships and other government savings
  • Cuts to the Sydney Startup Hub and innovation programs: These cuts, made by the previous government, have been continued in this budget.

What should be done next:

  • Development of an Economic Strategy for NSW: Currently there is no overarching strategy guiding the transition of our economy and aligning our infrastructure, land-use and infrastructure strategies to economic outcomes. With a clear need to add complexity to NSW’s economy, and drive the growth of emerging industries like Advanced Manufacturing, medical technologies and the startup ecosystem, a strategy that gives guidance to investors, businesses and the community is needed.
  • Investment into future industries: Aligned with the NSW Government’s commitment to local manufacturing and decarbonisation of the economy, investment will be need to support early-stage companies scale and export.
Equity and fairness

This budget firmly focussed on rebalancing investment towards people – most notably in wages for public sector workers.

  • $3.6b for essential worker wages, addressing a critical challenge facing our city – teachers, nurses and key workers being priced out of Sydney
  • $769.3m for 100 new preschools on public school sites where they are needed most, and $60 million to fund new and upgraded non-government preschools
  • A $224m Essential Housing Package focussed on social housing and homelessness 
  • Up to $64m over two years to provide $500 preschool fee relief for 3-year-olds in eligible long day care settings. This measures will support up to 64,000 children
  • Up to $28.5m over five years to address workforce shortages and support business capability in the early childhood education and care sector
  • $13.8b in health facilities including $350m for Canterbury Hospital Redevelopment, $120m for an expansion of Blacktown and Mount Druitt Hospitals, $550m for the Fairfield Hospital Redevelopment, additional $300m for the new Rouse Hill Hospital totalling 600 new hospital beds in Western Sydney. This is critical in the context of climate change disaster preparedness.

What should be done next:

  • Make the next budget a proper wellbeing budget: the budget is an opportunity to think about how we, as a community, should be using our wealth to grow our wellbeing. To do this we should be measuring budget measures against how they will improve longer-term wellbeing measures, not only against GDP growth. New Zealand has had five wellbeing budgets that offer an example of how to do it.
  • Further thinking around pre-school hours of operation is needed: if this investment is also about supporting women to rejoin the workforce, pre-school hours can make it difficult to participate full time in the workforce. As part of this historic investment into pre-school, the Government should consider whether the provision of Out of School Hours Care (OOSH) can be provided as part of these preschools to enable working parents to drop-off and pick-up their kids around working hours.