One of the reasons for the blows is what the budget calls “the huge investment in the health system to improve capacity and resilience, continued support for COVID-19 and the response to floods.” But new spending decisions by the government, including direct payments to households, are another important factor. This includes toll relief ($ 520 million over the next two years) and back-to-school grants that will apply a few months before the March 2023 election ($ 193 million).
3. Income and expenses
A challenge for all governments is to keep revenue growth and spending growth roughly aligned. COVID-19 made this impossible for governments around the world: the pandemic caused an increase in spending and a drop in revenue.
NSW was no different: state finances show that a large gap has been opened between spending and revenue over the past few years and the government expects it to gradually narrow. But this will not be easy. They will have to do very well if the government wants to deliver its next surplus as expected in 2024-25.
4. Where does the money come from
The state budget is still recovering from the damage caused by COVID-19. But the government has recently received some unexpected revenue to strengthen the coffers.
As this chart shows, the GST is a major contributor to state finances and is projected to increase by $ 11.5 billion over the next four years than previously expected. Mining royalties will also be much higher due to a rise in world commodity prices.
But this year’s budget comes with a warning: in the long run, as the population ages, revenue is expected to grow at a slower pace than it has historically had. The best way to meet this challenge, says the budget, is through reforms that boost the productive capacity of the economy.
5. Double the debt
The state’s debt position has deteriorated sharply since the start of the pandemic. A key metric is net debt that takes into account the liabilities and assets of the state.
In the last two years, this measure has increased from $ 22.7 billion (3.6 percent of the state’s gross domestic product) to $ 53.5 billion (8 percent of the state’s gross domestic product) and is projected to reach to $ 115 billion (or 14 percent of GSP) in June. 2026.
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