Introduction
After 12 years in Opposition, the NSW Labor Party, led by Chris Minns, has formed a government, following a win at the state election over the weekend. Labor’s election platform included a strong housing agenda with a focus on rebalancing growth across Greater Sydney and a commitment to deliver greater urban density around transport hubs and key strategic centres. Labor has also committed to streamline the planning system and improve coordination of social and affordable housing investment through a series of machinery of government changes, including the establishment of Homes NSW. The new Government will also seek to centralise planning decision-making by ensuring all state-related planning matters are the responsibility of the Planning Minister.
While the newly elected Labor Government has committed to continue delivery of the four-year public infrastructure pipeline, Premier Minns has pledged to end privatisation of government-owned assets. This decision alongside the commitment to abolish the Transport Asset Holding Entity of NSW (TAHE NSW) and the public sector wage cap is likely to put increased pressure on the state’s balance sheet as the Labor Party comes into government. Further
As of publication, the composition of the 93 seat Legislative Assembly stands at 45 seats won by the NSW Labor Party, 25 seats won by the NSW Liberals and Nationals, two by the Greens, seven seats won by Independents, with 14 seats still in doubt.
The Property Council the newly elected Minns Government and looks forward to working closely together to advocate on behalf of our members and their key priorities as set out in our 2023 NSW Election Platform.
A comprehensive analysis of the incoming Government’s commitments, including an overview of the economic and fiscal outlook, major taxation, housing and infrastructure announcements is set out below.
Economic and Fiscal Overview
The Pre-election Budget Update (PEBU) released on 8 March 2023 sets out a clear picture of the economic and fiscal position of the state as Labor assumes control of government. Labor takes over the Treasury benches in the face of high energy prices, geopolitical uncertainty and an escalation in interest rates.
According to the PEBU, the NSW economy is expected to grow by 3.75 per cent in FY2022-23, while employment is forecast to grow by 5.5 per cent in the same financial year. Economic growth is projected to then moderate over the forward estimates (see Figure 1). In addition, the NSW population growth rate is expected to average 1.2 per cent over the forward estimates reflecting the increased flow of new migrants into the country.
Figure 1: Economic performance and outlook
The estimated budget deficits for FY2022-23 and FY2023-24 have been revised downwards since the 2022-23 Half-Yearly Review, due to downward revisions to coal royalty revenue. Surpluses are projected in FY2024-25 and FY2025-26.
Consistent with lower forecast revenue in FY2022-23 and FY2023-24, general government sector net debt is projected to be $79.2 billion in FY2025-26 (10.4 per cent of GSP), $798 million higher than estimated at the 2022-23 Half-Yearly Review.
Net debt is forecast to increase to $118.4 billion in FY2025-26 (See Figure 2). The Half Yearly Review forecasts net debt to decline in the second half of the decade, which is broadly consistent with the projections at 2022-23 NSW Budget.
Figure 2: NSW net debt forecast
It is critical to note the forecasts set out in the PEBU don’t take account of Labor’s election commitments and will likely be revised when the Minns Government tables its own Budget in the coming months.
While the PEBU does not account for commitments made over the course of the campaign, the NSW Parliamentary Budget Office’s (PBO) independent assessment provides an insight into the revenue implications of Labor’s funding pledges. The PBO found the estimated impact of policies announced by the NSW Labor Party on the Net Operating Balance would be an increase of $1.4 billion over the four years to FY2025-26, excluding the cost of removing the public sector wage cap which is currently unfunded.
Additional budget pressures are also likely to emerge over the forward estimates and beyond with the Labor Government’s commitment to end privatisation of state-owned assets, alongside the abolition of TAHE NSW.
Property Tax
The NSW Labor Party has committed to abolish stamp duty for first homebuyers buying a home worth up to $800,000 and offer a concessional rate to first homebuyers purchasing a property valued between $800,000 and $1 million. According to the Parliamentary Budget Office, Labor’s Plan will remove or reduce stamp duty for 95 per cent of first home buyers and will reduce net revenue by $722 million over the next four years. In addition, the NSW Labor Party has committed to repeal the Property Tax (First Home Buyer Choice) Bill 2022, which was passed through Parliament late last year.
While the property sector welcomes the commitment to abolish stamp duty for some segments of the market, we remain concerned about their plans to remove the land tax option for first home buyers through the proposed repeal of the Property Tax Bill 2022.
The passage of the Bill represented a critical first step in the journey towards an efficient broad-based land tax and a path to genuine reform. As the NSW Productivity Commission outlined, a tax of this kind, if extended to the full market, has the potential to improve labor mobility, land use allocation and the productive use of land around key infrastructure projects and development precincts.
In light of these benefits, the Property Council has called on the new Government to reconsider its position and work with the property industry to create an equitable, sustainable and efficient tax system that works for families and investors.
Infrastructure Contributions
In October 2021, the Department of Planning and Environment undertook a public consultation on recommended changes to replace the existing Special Infrastructure Contribution (SIC) system with a simpler, broad-based charge in Greater Sydney, the Central Coast, Lower Hunter and Illawarra-Shoalhaven.
The NSW Half Yearly Review forecast these reforms to increase revenue by $924 million over three years to FY2025-26, however they were abandoned late last year. Prior to the election period, the then-Coalition Government indicated its intention to introduce an amended package of contributions reforms in 2023.
At this stage, it is unclear whether the incoming government will seek to progress their predecessor’s infrastructure contributions reform package or seek to reopen the public consultation process. The infrastructure contributions framework still deserves the clarity, simplicity, efficiency, transparency and certainty that the former Coalition Government’s original reform sought to deliver.
The Property Council will continue to urge government to re-commit to the delivery of the reforms in line with the NSW Productivity Commission’s recommendations, ensuring the contributions system in NSW is jurisdictionally competitive and does not operate as a handbrake on the state’s growth.
Housing and Cities
The Labor Party made several welcome announcements during the course of the campaign acknowledging the depths of the housing crisis – committing to deliver higher density development around key transport hubs, streamline planning approval processes, establish a new affordable and social housing delivery agency, and enhance delivery of affordable housing in NSW.
These announcements included the establishment of Homes NSW, which will bring together the Land and Housing Corporation, Aboriginal Housing and DCJ Housing into one central agency. Under the plan, Homes NSW will be responsible for delivering and managing social and affordable housing across the state.
The new Premier has also committed to charge the Greater Cities Commission with rebalancing population and housing growth by setting new housing targets matched to infrastructure development.
Transport Orientated Development
The Labor Party made several welcome announcements during the course of the campaign acknowledging the depths of the housing crisis – committing to deliver higher density development around key transport hubs, streamline planning approval processes, establish a new affordable and social housing delivery agency, and enhance delivery of affordable housing in NSW.
These announcements included the establishment of Homes NSW, which will bring together the Land and Housing Corporation, Aboriginal Housing and DCJ Housing into one central agency. Under the plan, Homes NSW will be responsible for delivering and managing social and affordable housing across the state.
The new Premier has also committed to charge the Greater Cities Commission with rebalancing population and housing growth by setting new housing targets matched to infrastructure development.
Planning and Machinery of Government changes
To help improve planning coordination and decision-making, Labor has pledged all planning responsibilities other than at local government level will sit solely with the Minister for Planning. The Minister will be charged with reducing regulation and improving state-led assessment processes to improve the flow of housing supply.
The Property Council intends to immediately engage with the new Planning Minister to ensure that changes to responsibilities lead to greater efficiency and certainty in decision making rather than add another layer of complexity.
Affordable Housing
To help improve planning coordination and decision-making, Labor has pledged all planning responsibilities other than at local government level will sit solely with the Minister for Planning. The Minister will be charged with reducing regulation and improving state-led assessment processes to improve the flow of housing supply.
The Property Council intends to immediately engage with the new Planning Minister to ensure that changes to responsibilities lead to greater efficiency and certainty in decision making rather than add another layer of complexity.
Rental reform
Several changes are foreshadowed to be made for renters in NSW. Premier Minns has committed to establish a Rental Commissioner who will be tasked with:
- Leading consultation and drafting of legislation to introduce reasons for eviction,
- Implementing a portable-bonds scheme
- Overseeing a ban on rent bidding
- Identifying barriers to increasing housing supply for renting
- Identifying practices and gaps that erode the rights of renters
- Identifying options for longer term agreements
- Developing educational resources for renters and owners
- Gathering data on renting and survey renters to help inform future policy making, and
- Identifying ways for renters to more easily access energy efficiency initiatives.
The Property Council looks forward to working with the Rental Commission to increase the supply of rental properties in the market and develop a sensible and well-calibrated policy framework to improve security of tenure in NSW. This includes restating the case for at-scale build-to-rent development in NSW.
Building and Construction Reform
- The incoming Government has committed to several key changes across the building and construction sector including the following measures:
- Appointing a separate Minister for Building who will be responsible for the NSW building industry
- Establishing a NSW Building Commission, a single body to oversee the regulation, licensing and oversight of the industry
- Creating a single Building Act, consolidating existing legislation
- Introducing stricter requirements on private building certifiers, including limiting their work from a single builder or developer to 50 per cent of their total income
- Standardising certifications from licensed tradespeople to be lodged on the e-planning portal
- Appointing a Strata Commissioner to oversee strata governance and policy across government
- Reviewing the progress of Project Remediate, and
- Reviewing the Home Building Compensation Fund.
The Property Council looks forward to working with the new Government, the NSW Building Commissioner, alongside other stakeholder, on progressing a sensible approach to building and construction reforms which deliver greater certainty over the quality of the built product in NSW.
Public Infrastructure Overview
According to Infrastructure Partnerships Australia’s analysis, the 2022-23 NSW Budget allocated $88.9 billion in general government expenditure to infrastructure over the next four years out to FY2025-26. While the newly elected Labor Government has committed to continue delivery of most of the four-year public infrastructure pipeline, some major projects will be cancelled, reprofiled or rescoped.
In a commitment that defined the election debate, Premier Minns has pledged to end privatisation of government-owned assets under his leadership. The new Government will seek to enshrine public ownership of Sydney Water and Hunter Water in the Constitution and introduce legislation to retain public ownership of government-owned corporations.
Asset recycling has played a vital role in funding and accelerating significant capital investments across the infrastructure sector including in transport, health and education. The program has also been critical in improving the operational efficiency of under-performing public assets through their transfer to private ownership and management.
The Property Council is concerned that ruling out future asset recycling initiatives will deprive the state of these dual benefits. The Labor Party’s decision will also raise concerns about the ability of the state to maintain the Triple A credit rating, as legislated under the Fiscal Responsibility Act, whilst funding a significant pipeline of forward infrastructure projects needed to support housing delivery.
Transport Infrastructure
The NSW Labor Party made a series of transport related commitments over the course of the election campaign. An overview the headline commitments is included below.
Labor pledged $1.1 billion to a local roads program for Western Sydney and regional NSW over the next three years, with $560 million for road infrastructure in Sydney’s North West. The funding package will include $75 million for the final planning and early construction works for Bandon Road, with the remaining $485 million allocated to the widening of Richmond Road and upgrading Garfield Road East.
In addition, commitments have been made to start construction of Parramatta Light Rail Stage Two within its first term of Government, with an additional $200 million in funding to finalise planning and procurement. This is in addition to Labor’s existing $602 million funding commitment for the project.
A business case investigation will also commence along three new rail lines in Western Sydney including:
- Tallawong to St Marys, to link with the Western Sydney Airport Metro
- Aerotropolis (Bradfield) to Glenfield via Leppington (current), and
- Aerotropolis (Bradfield) to Campbelltown / Macarthur.
Tolling Reform and Relief
NSW Labor committed to comprehensive tolling reform alongside a series of toll relief schemes for motorists. The new Government will appoint Professor Allan Fels AO, former chairman of the Australian Competition & Consumer Commission (ACCC), to develop a tolling reform proposal.
Professor Fels’s will be tasked with taking over the current Treasury and Transport Tolling Review and developing long term reform options for the new Government, with consideration of the following:
- Potential competition in toll contracts
- Moving freight onto toll roads at night
- The intersection of public transport and toll roads
- Long term concessions, and
- What other jurisdictions are doing and compliance with toll contracts.
In addition to the review, Labor has committed to tolling relief including:
- A $60 weekly toll cap for motorists for two years, on top of the existing toll rebate and M5 cashback schemes
- Extend annual savings of up to $3800 to tradies and truck drivers on the M5 East and the M8, at a cost of $34.1 million, and
- Keep the Sydney Harbour Tunnel toll concession under public ownership and management and return revenue to drivers in the form of toll relief.
Social Infrastructure
NSW Labor made a series health and education related commitments over the course of the election campaign. An overview of the headline commitments is included below.
In its next Budget, the incoming Labor Government will allocate:
- $700 million to deliver the Rouse Hill Hospital
- $225 million over three years to expand the Canterbury Hospital
- $150 million to expand Blacktown and Mt Druitt Hospitals
- an initial $115 million over three years to upgrade Fairfield Hospital, and
- $15 million to commence planning and site selection for a new public hospital in the Aerotropolis.
They also have committed $176 million towards delivering new schools and school upgrades for the North West, as part of its Growth Areas Schools Plan. This is in addition to an existing commitment to deliver 100 public preschools co-located with government primary schools in its first term of government.
Energy and Sustainability
The NSW Labor Party made several commitments related to energy security and affordability over the course of the election campaign. Headlining the commitments was a pledge to legislate NSW’s carbon emissions reduction targets, including net zero by 2050 and a 50 per cent reduction on 2005 carbon emissions levels by 2030.
To achieve its decarbonisation objectives, the new Government will move to establish a Net Zero Commission. The Commission will be responsible for developing a 2050 net zero plan and monitoring the state’s trajectory against targets, impacts on jobs and industry, as well as energy prices. Under the proposal, the Commission will be tasked with updating the plan every five years.
A state-owned energy company will also be established – the NSW Energy Security Corporation. It will be seeded with a $1 billion investment from the existing Restart NSW Fund and will partner with private investors to build energy storage infrastructure.
Modelled off the Commonwealth’s Clean Energy Finance Corporation, the state-owned energy company will not seek direct ownership of energy assets but will instead co-invest in medium to long duration storage, alongside community batteries.
The Property Council welcomes Labor’s focus on decarbonising the grid through well-targeted government intervention. While there is a wave of private capital available to invest in clean energy projects across Australia, investment in large-scale grid-firming technologies, like pumped hydro, has proved challenging for the private sector.
These high capital, low yield projects often don’t attract private financing because their return on investment is too long realised. Bridging this market gap through public financing makes sense and will go some way to improving reliability as we transition to a renewable-powered grid.
Beyond the energy security commitments, Labor announced it will establish a $485 million Energy Relief Fund for small businesses and households. Under the program, eligible NSW small businesses will receive a $315 energy rebate. When matched by funding from the Federal Government’s rebate scheme, around 320,000 eligible NSW small businesses will see $630 directly debited off their electricity bill.
To be eligible for the rebate, small businesses must meet the standard criteria set out under National Energy Retail Law – a maximum of 100 MWh of electricity per year. NSW households would receive $250 directly off their energy bill. When matched with $250 from the Federal Government’s Energy Bill Relief Fund, around 1.6 million eligible households will get a $500 rebate.