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Bold reforms needed to fix NSW finances

  • May 31, 2016

Bold reforms needed to fix NSW finances 

A $17 billion black hole identified in the third NSW Intergenerational Report underscores the need to tackle tax and planning reform in the state, says the Property Council’s NSW executive director, Jane Fitzgerald.

The report, released last week, projects the state of the NSW economy, its fiscal position and demography over the next 40 years.

On current trends, the NSW Government will face a widening fiscal gap between revenues and expenditure equating to 3.4 per cent of Gross State Product (GSP) by 2056. This is equivalent to $17 billion if applied to today’s GSP.

Net debt would rise from around one per cent today to almost 75 per cent of GSP in 2056, with one fifth of revenues being directed towards interest repayments.

“The report makes clear that NSW is highly dependent on revenue from state taxes, including highly inefficient stamp duty which costs $800,000 for every $1 million raised,” Fitzgerald explains.

“Stamp duty is a rollercoaster tax. While NSW is enjoying the highs right now thanks to booming property markets, there is a need to guard against downside risks.”

The NSW Intergenerational Report also outlines the state’s future housing challenge. By 2056, 11.2 million people will call NSW home, and 1.8 million new homes will need to be built to accommodate this growth.

But governments are constrained by limited new land available for future release and ongoing investment required to ensure infill high-rise housing remains liveable, Fitzgerald explains.

“Without further bold reform of the planning system, we will not maintain the levels of housing supply necessary to meet demand and improve housing affordability,” Fitzgerald adds.

An ageing population over the next four decades will also translate into escalating health expenses, and Fitzgerald says the government should “seize the opportunity to unlock age-appropriate housing for seniors through the planning system, as evidence shows a significant health and fiscal return.”

Download the NSW Intergenerational Report 2016.