Monday, 2 July, 2018

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Consequences of the 2018 NSW Budget for Hunter businesses and households are mixed. That is according to analysis by Dr Anthea Bill, the HRF Centre’s lead economist. Dr Bill presented at a recent Hunter Business Chamber event, responding to an overview of the budget provided by the NSW Treasurer, the Hon. Dominic Perrottet.

Small business

Perrottet and Bill discussed budget measures to lift the payroll tax exemption threshold from $750,000 to $1 million by 2021-22.

The Government estimates that 40,000 businesses in NSW will have their payroll bill reduced. It predicts that 5,000 businesses will eventually pay no payroll tax at all.

“Tax relief measures will likely work to reduce costs for businesses. In turn, the hope is that these will allow businesses to increase employment, lift wages and/or reinvest,” Bill stated.

Businesses in regional NSW are likely to benefit from the payroll tax relief as they generally sit closer to the $750,000 - $1 million threshold range.

Jobs NSW has found that high-growth small and medium enterprises (SMEs) have been the “silent engine room” of the state’s jobs growth. Between 2008 and 2014, over one million jobs came from just six per cent of businesses, new or growing SMEs. In this context, where incentives encourage small businesses to grow employment, tax-relief makes sense, Dr Bill explained.

Infrastructure

Noting that local media had commented that the budget was ‘light on’ when it came to dedicated infrastructure commitment for the Hunter, Dr Bill stated: “The state’s infrastructure spend overall is reportedly its largest ever. They have promised $87 billion over four years. The big winner is Western Sydney. It is seen as the growth engine of the Sydney economy.”

“The Government has reserved $3 billion for the high-speed West Metro rail line. That is planned to run underground from Parramatta to Sydney’s CBD. Sydney is a major market and supplier for many Hunter businesses. Improving connectivity within Sydney, such as between Sydney CBD and Parramatta, may actually benefit the Hunter.”

Metropolitan vs regional

Newcastle has been redefined as ‘metropolitan’ rather than ‘regional’ under the latest budget papers. That raises questions about how Newcastle accesses and competes for funding allocations, Dr Bill said.

“Treasury says that Newcastle is metropolitan, consistent with Australian Bureau of Statistics’ ‘major urban’ classification, meaning that it has more than 100,000 people. While the change in the funding classification is a measure of Newcastle’s success, we are dwarfed by Sydney’s size and employment. In the last Census, Sydney’s population was 4.5 million, seven times the 623,000 in the Hunter as we define it.

“There have been questions raised in local media over whether the re-classification of Newcastle as metropolitan would mean that we miss out on getting our ‘fair share’ of funding. The Hunter Business Chamber is advocating for a mid-tier classification for funding”. The NSW Business Chamber contends that the regional economic centres of the Hunter and the Illawarra offer businesses a lower cost base and productivity benefits.

Regional centres provide a solution to ‘big Australia’, Dr Bill explained. She cited research from the Regional Australia Institute offering sound reasons for regional devolution. “They estimate that for every 100,000 people who choose small cities instead of big cities, $50 billion is released into the economy through avoided congestion and mortgage costs in the capital cities.”

Cities like Geelong are pursuing a “second cities agenda” bringing together community, stakeholders, government and global leaders to promote development outside of capital cities.

“The competitive advantages of these centres need to be harnessed to provide the next wave of investment and jobs growth,” Dr Bill said.

Education and training

Dr Bill supported the budget’s promised investment of $42.1 million in capital works funding for preschools. That is expected to deliver 4,800 extra community preschool places in growth areas. The Hunter’s disadvantaged communities would also benefit from funding that would create free pre-school places for three year olds.

“2016 Census data shows that many of the Hunter’s disadvantaged locations have a high proportion of children under 4. This commitment should assist children and families in these communities. So will the continuing Start Strong investments subsidising preschool fees in the year before school.”

Increased funding for vocational education and training (VET) initiatives will benefit the region, Dr Bill noted. Budget allocations fund 100,000 fee-free apprenticeship places. Dr Bill welcomed the investment, explaining that numbers of apprentices in-training had fallen significantly from 2012 to 2017, as they had across the state.

The Hunter - excluding Newcastle and Lake Macquarie - has the highest proportion in the state of 25-34 year olds with a ‘certificate’ qualification. VET provides an important conduit for Hunter young people not pursuing university-based education options.

“It supports our construction and manufacturing sectors,” Dr Bill explained. “The NSW Government’s expenditure is aimed at creating a pipeline of skilled workers needed to meet future demand.”

The budget funded TAFE Connected Learning Centres at Scone and Singleton. These digitally-enabled learning environments offer regional students better access to TAFE NSW courses.

Health

Another significant budget item is $8 billion over four years allocated to hospital upgrades. There is also extra money for 950 nurses and midwives, 300 doctors and 120 allied health workers. Health and social services is the Hunter’s leading employment sector.

“This commitment provides two-pronged benefits. Firstly, there is an economic uplift as the construction of hospital upgrades has a flow-on effect. Local construction workers spend their income in the region. Secondly, improved health services can help to attract and support greater population growth in the future.”

Health expenditure supports the Hunter’s ageing population, as well, Dr Bill noted. “The population of NSW is ageing, but it is more prominent in the Hunter.”

Tourism

Tourism is a significant and growing part of the Hunter economy. More than 10 million visitors - overnight and daytrip - spent $2.7 billion in the region in the year to December 2017.

In the last year, the Hunter has out-paced the state in its growth in tourism expenditure, a rise of 13 per cent compared to 9 per cent. It is starting to see some welcome growth in overnight stays, expenditure on which grew 17 per cent compared to 11 per cent for NSW.

Budget allocations for regional tourism facilities include:

•$7.1 million over four years for Tomaree coastal walk,

•$3 million for Port Stephens Koala Hospital and tourism facility, and

•$6.3 million for a war-plane tourist centre at Scone Regional Airport.

Summary

The budget offers support for small businesses, with particular benefits for regional Australia.

The Hunter did not receive a significant amount of infrastructure spending in this budget. Committed expenditure on key projects is continuing, though. Such continuity creates certainty for investors.

“It would be wonderful for the budget to bolster such certainty in the future for the Hunter region’s economy and residents,” Dr Bill concluded.

NSW Government commitments for the Hunter region in 2018-19

Funding for school upgrades, including:

  • Newcastle East Public School
  • Hunter School of Performing Arts
  • Hunter Sports High School

Funding for TAFE Connected Learning Centres at Scone and Singleton

Funding for health, including:

  • Planning for future works at John Hunter Hospital
  • Continued investment in Maitland Hospital and Manning Base Hospital
  • Funding for rural health infrastructure upgrades including at Scone and Gloucester

Transport infrastructure, including:

  • $110.2 million for Newcastle Light Rail Project
  • $38 million for New England Highway Scone Bypass
  • $48.1 million for heavy vehicle safety and productivity, and flood alleviation works on Golden Highway
  • $16.3 million to continue upgrading intersection of M1 Motorway and John Renshaw Drive and Weakleys Drive
  • $14.5 million to complete planning and continue preconstruction for Stage 5 of the Newcastle Inner City Bypass
  • $8.3 million for upgrades to Nelson Bay road and plan for future improvements. 


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