The New South Wales government has revealed that the state will be $14bn worse off over the next four years than it had previously forecast as it is now expecting the budget to be in deficit until at least 2027.
With hopes of a return to surplus dashed, the government is now expecting a $3.6bn deficit in the coming 2024-25 financial year, according to a budget excerpt circulated by state Treasury on Monday.
When it delivered its first budget last September, the Minns Labor government forecast a $7.8bn deficit in 2023-24, which has now been revised to $9.7bn. It was expecting an $844m surplus in 2024-25.
The government had been anticipating a $1.6bn surplus in 2025-26 but the budget it hands down on Tuesday will forecast a $2.5bn deficit. It had forecast a $1.5bn surplus in 2026-27 but is now predicting a $2.4bn deficit.
The treasurer, Daniel Mookhey, has been setting the scene for another restrained budget and told the people of NSW not to expect anything splashy.
An excerpt of the speech Mookhey will deliver in parliament on Tuesday shows he will blame the redistribution of the goods and services tax for the state’s financial woes.
Mookhey will describe the GST system as “unfair” and say that for every dollar that Victoria will give to the smaller states next year, NSW will give “upwards of four” and that it “deserves its fair share”.
He will say the change to the GST carve-up will mean NSW is only getting back 87 cents of every dollar of GST it contributes to the federal pool of revenue generated by the tax, down from 92 cents.
Under the redistribution recommended by the Commonwealth Grants Commission in March, all states and territories will receive more GST than last year, except for Queensland, which will receive $469m less and NSW, which will receive $310m less.
The grants commission explained Queensland and NSW were expected to increase their capacity to earn revenue, particularly because of coal royalties and soaring land values, and should therefore get less from the GST pool.
Mookhey has previously said the latest GST allocation would cost NSW $11.9bn and “almost certainly” result in the state losing its AAA credit rating.
In his speech on Tuesday, Mookhey will promise that the government will “absorb” the lost revenue through “careful spending” rather than “hitting families or businesses”.
On Saturday Mookhey announced that land tax thresholds would be lifted for the 2024 financial year and then left steady without indexation for inflation. The “modest” changes would generate $1.68bn over the next four years. Foreign investors would also be taxed more.
The move followed Victoria’s budget last year that hit those owning a second home or investment property with additional land tax charges. Victorian landholdings worth more than $300,000 will pay a $975 fee plus 0.1% of the total land value.
Housing is expected to be at the centre of this year’s budget.
The government will shell out $1.4bn over four years for new and upgraded schools for regional communities and $253m for planners to speed up the assessment of development applications, to deliver housing uplift and infill across Sydney.
The premier, Chris Minns, last month announced $200m for councils that meet and beat a fresh set of housing targets as part of the NSW government’s push to build nearly 400,000 new homes over the next five years.
The government will also spend $66.9m to extend several early intervention and diversion programs for young people who are at risk of reoffending or committing crimes and $20m on a new case management IT system for youth justice workers.
This is in addition to a $26.2m package of youth crime initiatives which the government announced in March along with new laws that would make it harder for teenagers to get bail and criminalise “posting and boasting” about offences on social media.
Tuesday’s budget is also expected to fund an emergency $230m domestic violence package.
• The headline of this article was amended on 18 June 2024. The deficit faced over the next four years is $10bn, not $14bn; the latter figure is how much worse than forecast the budget has become since last year.
