2022-23 Half-Yearly Review: Fiscal position and outlook

Overview

Since the 2022-23 Budget, NSW economic growth outcomes have been stronger than expected. In the face of global pressures, the resilient economy is supporting State revenues which are forecast to increase by $11.1 billion over the four years to 2025-26. The State remains on track to return to a surplus in 2024-25 ($333 million) and 2025-26 ($1.2 billion).

The deficit in 2022-23 has remained broadly stable since the 2022-23 Budget. In 2023-24, the Half-Yearly Review projects a deficit of $6.5 billion, a deterioration of $3.7 billion since the Budget. This is primarily driven by:

• the Government’s response to major storm and flood events since June 2022
• increased health expenses, as the NSW health system continues to manage a range of pressures associated with the recovery from COVID-19
• increased transport expenses as public transport services are maintained, even though revenue has declined principally due to changing work patterns following the COVID-19 pandemic.

Significant uncertainty remains in the economic and fiscal outlook.

Since the Budget, the Government has made progress on reform initiatives to support productive capacity. The Government has also continued to provide cost of living relief for those who need it most, as the nation continues to experience the highest inflation in more than three decades. This includes toll relief, regional travel benefits, first home buyer incentives, gas rebates and energy bill rebates.

The State’s infrastructure program is projected to rise to a record $116.6 billion over the four years to 2025-26, an increase of $3.9 billion driven by investment in new and existing transport infrastructure.

In September and October 2022, New South Wales had both of its triple-A credit ratings reaffirmed by Moody’s and Fitch.

Rebuilding the state’s fiscal capacity

The Government’s fiscal priorities, as set out in the 2022-23 Budget, remain unchanged. These are to:

• continue to support and invest in the productive capacity of the State, to support and accelerate long-term economic growth for New South Wales
• rebuild a fiscal buffer with a return over the forward estimates to a sustainable operating and debt position, supported by fiscal repair measures.

The State remains on track to return to surplus in 2024-25 and 2025-26.

The Government is committed to maintaining net debt at sustainable levels. Since Budget, the projection for net debt to gross state product has remained relatively stable at around 14 per cent from 2026, with net debt projected to decline in the second half of the decade.

WestInvest

In 2021, the Government announced WestInvest – a $5 billion commitment to deliver infrastructure across Western Sydney. The investment aims to transform the region and make it an even better place to live, work and raise a family.

The $5 billion program includes a $3 billion State Government stream and a $2 billion Community Projects Fund.

Since the initial tranche of projects in the Budget, the $3 billion State Government stream has approved further projects, including:

• the Westmead Education Campus – a primary and selective high school within the Westmead Health and Innovation District
• $1 billion for upgrades of critical roads in Western Sydney, including: 
  • $200 million for safety improvements on Elizabeth Drive (at Kemps Creek)
  • $100 million for the Pitt Town bypass
  • $100 million for upgrades to Garfield Road East between Piccadilly Street (Riverstone) and Windsor Road (Box Hill)
  • $600 million set aside for other road upgrades across the 15 eligible local government areas.

The $2 billion Community Projects Fund is comprised of $400 million in grants allocated directly to 15 eligible local governments and $1.6 billion in grants to non-government organisations allocated via a competitive process.

Revenue Measures

Key revenue decisions or extensions since the 2022-23 Budget include:

• reforming the collection of contributions for state and regional infrastructure, with the revenue to contribute to the cost of growth-enabling infrastructure projects in the regions where it has been collected
• increasing the rate of casino duties
• extending the principal place of residence land tax exemption for those building or renovating their family home
• replacing the Fair Go for Safe Drivers Scheme with a revision to cautions for minor driving offenses.

In addition to these revenue measures, the First Home Buyer Choice commenced on 16 January 2023. This was announced in the 2022-23 Budget and provides eligible first home buyers with the choice of paying stamp duty or an annual property tax when purchasing their first home.

Buyers purchasing an established or new home up to $1.5 million or vacant land up to $800,000 are able to opt-in to the property tax. This option lowers the upfront burden of paying stamp duty and enable access to home ownership sooner.

Expense Measures

Major new policy measures since the 2022-23 Budget include:

• $2.6 billion* over four years to support families, businesses and councils in response to major storms and flooding events. This includes: 
  • $800 million for the Resilient Homes Fund 
  • $500 million to deliver the Regional and Local Roads Repair Program 
• $3.0 billion over four years to meet cost pressures on New South Wales' existing rail infrastructure program including fleet modifications and upgrades due to industrial action
• The Energy Bill Price Relief Plan to put downward pressure on energy prices in partnership with the Australian Government 
• $612.5 million in 2023-24 for the continuing health response to COVID-19 
• $430 million in 2022-23 to deliver additional financial assistance for taxi licence owners 
• $179 million additional funding to continue the Intensive Learning Support Program, providing small group tutoring to support students
• $139 million over three years to 2024-25 to fund the delivery of new or enhanced urgent care services in collaboration with the primary, community and acute care sectors 
• $99.8 million over five years to provide increased access to out-of-home care for young people to the age of 21 
• $67.4 million over four years to combat biosecurity threats including foot and mouth disease, with an expanded workforce, on-ground animal control activities and enhanced disease surveillance

^{* includes capital funding and Australian Government contribution}