Labor’s election promises would deliver a $1.3bn improvement to the New South Wales budget over four years compared with the Coalition’s promises, according to the Parliamentary Budget Office.
Assessments of the policies announced on Monday come less than a week before polls close on the state’s election on 25 March. Pledges made after today may alter the relative standings.
Labor’s platform would improve the net operating budget for the four years to 2025-26 by $1.4bn compared with a $97.2m improvement over that period for the Coalition, the office said.
That is made up by Labor cutting expenses by $1.2bn over the four years compared to a $500m reduction for the Coalition. On revenue, Labor planned to increase inflows by $226m over four years compared with the Coalition’s reduction of $403m.
For capital spending, Labor’s policies cut outlays by $675m over the four years, while the Coalition plans to spend an extra $3bn, the office said.
Surveys of voters indicate the 25 March results could be a close one. Whether Labor wins office or the Coalition secures a fourth term, NSW will face another couple of years of budget deficits and a rising debt load to service.
How NSW's debt (and ratings) compare with other states according to S&P Global before the latest election promises. pic.twitter.com/Hi8qm7E0uB
— @phannam@mastodon.green (@p_hannam) March 20, 2023
The PBO’s assessment noted a range of risks in both Labor and Coalition policies that could alter the overall outcome.
For instance, the office examined Labor’s plan to lift the existing 3% cap on wages growth of public services for 2023-24 and 2.5% in subsequent years. Any increase would be met by productivity gains.
However, should the change result in a one percentage increase in wages, remuneration costs would increase by a cumulative $2.6bn over three years, the office said. Any increase not met by productivity improvements would dent the budget’s bottom line.
Treasurer Matt Kean said the wages cap changes meant Labor’s numbers “simply don’t add up”.
“Our policy is very clear and shows public sector wages in NSW will grow by $1.5bn from 2022-23 to 2023-24. They’re forecast to grow by $1.8 bn the following year,” he said. “It is simply impossible to pay public sector workers more at a cost of zero dollars.”
“[Labor leader] Chris Minns is either lying to workers or he’s lying to his union mates,” he said. “The risk is clear that he could also be forced to either cut services or sack workers.”
Daniel Mookhey, shadow treasurer, dismissed the view, saying the PBO’s $1.4bn bottom line improvement by Labor underscored its “conservative” approach to the state’s finances. The assessment also excluded the more than $4bn reduction in debt that Labor would deliver, he said.
“Mr Kean is promising more debt and deficit, which is only going to lead to more privatisation,” Mr Mookhey said. “[He] has not put aside a single dollar for his $52bn in infrastructure promises.”
Mookhey said the cost of the Northern Beaches Link promised by the Coalition was also not captured by the PBO, as was only $240m of the $20bn likely for two new metro rail links.
The Coalition’s plan to raise the dam wall by 14m at Warragamba for flood mitigation is noted by PBO as carrying a hefty price tag even though it is not included in the forward estimates.
Labor’s numbers to cancel the wall raising would bring savings of $3.9m in expenses in 2022-23, the PBO said.
However, the dam itself will cost $1.95bn to build, according to Infrastructure NSW. That sum would swell further once the cost of biodiversity offsets to compensate for the environmental impacts in the World Heritage-listed Blue Mountains region are added, the office said.
Martin Foo, a director at S&P Global Ratings, said the promises of the major parties were “unlikely to shift the dial” on the agency’s previous assessment of NSW’s debt position.
NSW’s “AA+” rating – S& P’s second-highest – underscored the state’s strong debt fundamentals, Foo said.
Should public sector wages rise above the existing caps, S&P would be watching carefully but at this stage such a move would only “be very, very slightly negative” for the state’s debt ratings, he said.
