Analyzing the NSW Budget through Five Charts: A Comprehensive Breakdown

Analysis: Breaking Down the NSW Budget in Five Charts

Introduction

The recent NSW budget, delivered by Treasurer Daniel Mookhey, paints a complex picture of the state’s economic landscape. Despite facing the challenges posed by the COVID-19 pandemic and devastating floods in 2022, the budget predicts a return to surplus and an improvement in the state’s debt position. However, it also acknowledges an economic slowdown and elevated risks to the economy. In this analysis, we will examine the key points of the budget using five charts.

Chart 1: From Red to Black

The first chart illustrates the state’s journey from deficit to surplus. The budget reveals a deficit of $7.8 billion for this financial year, marking the fifth consecutive year of shortfalls. However, through a combination of spending cuts, increased mining royalties, and improvements in key revenue sources such as stamp duty, land tax, and payroll tax, a surplus of $844 million is now predicted for the 2024-25 financial year. This turnaround is encouraging, indicating a path towards fiscal stability.

Chart 2: Economic Slowdown

Despite the improving budget position, the second chart highlights a marked slowdown in the state economy. The budget forecasts a stagnation in economic output per person over the next two years, attributed to higher interest rates. The budget warns that this is the weakest result, excluding the pandemic, since the global financial crisis. Additionally, unemployment in NSW is projected to reach 4.75%, significantly higher than the 2.9% rate registered in June. The budget also identifies three key economic threats: persistently high levels of inflation, the potential vulnerability of the economy to interest rate increases, and uncertainties surrounding the Chinese economy and its impact on NSW exports.

Chart 3: Where Will the Money Go?

The third chart provides insights into the allocation of funds in the NSW budget. The largest expense is allocated to health, covering public hospitals, with a projected cost of over $30 billion for this financial year. Following health, education, including public schools, accounts for $22 billion in expenditure. The third-highest expenditure is dedicated to servicing and maintaining the state’s transport system, encompassing trains, buses, ferries, light rail, and roads, with a budget allocation of $20 billion. The budget also highlights the significant investment in wages and superannuation for the state’s workforce, amounting to nearly $50 billion this financial year.

Chart 4: Rising Debt

The fourth chart sheds light on the state’s increasing debt. Just four years ago, before the pandemic and significant infrastructure investments, NSW’s net debt was negligible. However, the disruptions caused by COVID-19 and the need for infrastructure development led to a substantial rise in state borrowings. The budget indicates that the growth in debt has been curbed, with the state’s gross borrowings projected to be $173.4 billion by June 2026, $14.8 billion lower than the previous budget update in March. Treasurer Mookhey emphasized that this reduction is the largest-ever achieved in gross debt without privatization, resulting in savings of $2.3 billion in interest payments. Nonetheless, the state’s net debt is forecast to reach 12.5% of the state’s annual economic output, the highest level in three decades.

Editorial and Advice

The NSW budget represents a delicate balancing act in a challenging economic environment. While it is commendable that the government has managed to steer the state towards a surplus and reduce gross debt without resorting to privatization, the economic slowdown and heightened risks to the economy cannot be ignored. It is vital for policymakers to remain vigilant and adapt quickly to changing circumstances. As interest rates continue to impact economic growth, it is crucial to find ways to stimulate investment and support businesses and households. Prioritizing infrastructure development, investing in renewable energy, and enhancing the state’s export diversification efforts can help mitigate risks and foster economic resilience.

Conclusion

The NSW budget, as portrayed through the five charts, presents both positive and concerning aspects. While the path to surplus and the reduction in gross debt are encouraging signs, the economic slowdown and elevated risks require careful attention and strategic policymaking. By focusing on key sectors like health, education, and transportation, and by leveraging the potential of renewable energy and export diversification, the state can navigate these challenges and emerge stronger. It is essential for the government to strike a balance between fiscal responsibility and proactive measures to stimulate growth and protect the welfare of its citizens.