Remember, comrades, they’ll be celebrating new life just down the street from Parliament House at St Mary’s come Sunday
Just when you think that the Carr Labor Government has lost that old
political magic, up pops Michael Egan with a mini-budget that delivers
in spades. Here was cynical old me thinking that a pre-Easter statement
meant that the Government wanted this story dead by Friday; instead, it
might just resurrect their political fortunes.

This is a clever mini-budget: the big revenue raisers are land based,
but the Government’s still able to announce the abolition of stamp duty
for first home buyers on home prices lower than $500 000; the big cuts
are on the margins of public administration, and some sensible
restructuring is carried out in the guise of efficiency. In sum, it’s
strong on the revenue side; weaker on the expenditure side.

The headline grabber will be the abolition of stamp duty for first
homebuyers for properties valued up to $500 000. I reckon it won’t do
anything to slow the housing market in Sydney; prospective homebuyers
will just have a few extra thousand to factor in when making a bid. But
it robs the Opposition of a potent issue and a promise for the next
election.

Egan’s replaced the stamp duty magic pudding with a tax on the profit
from the sale of investment properties, and an overhaul of land tax. On
the land tax front, he’s abolished the threshold of $317 000, and
introduced a rate of 0.4% for properties valued up to $400 000, then a
marginal rate of 0.6% for land valued between $500 000 and $600 000,
with a rate of 1.4% kicking in at $600 000. Even this produces a
positive headline as the rate used to be a flat 1.7% for land valued
more than $317 000.

A new Premium Property tax of a seven percent stamp duty will apply on
properties sold for more than $3 million, with the duty falling only on
that portion over the $3 million mark. Egan doesn’t say how much this
will raise; I’m figuring not a whole lot, but it’s potent politics,
where those hit won’t attract a lot of sympathy from the rest of the
community.

On the stamp duty front, Egan’s introduced a 2.25% stamp duty on the
sale of investment property, where the vendor profit is more than 12%
of the purchase price, which is expected to raise $690 million. I bet
the screaming will be loud and long on this one, and many, including
Latham, won’t thank the Government for this one. It’ll hit the
aspirationals, who won’t like it anymore than when Gareth Evans
promised to tax their four wheel drives in 1998. But there was an
interesting line from the man who year in year out says that his
budgets are every inch a Labor budget. Talking about the overheated
property market, Egan said:

“An overheated property market is only good for people like me – people
who, besides owning their own home, have made good profits by owning an
investment or second property. We’ve made the profits on our property
investment, so I believe we can afford to pay a 21/4 per cent stamp
duty when we sell the property.”

Yes, investment property owners, Michael Egan shares your pain – he can
even feel it when he’s rummaging around in your hip pocket.

The other big revenue raiser, which will prompt outrage from the
minerals mob, is a change from flat royalties to ad valorem royalties
on coal. This change is expected to raise $44 million this year.

On the expenditure side, Egan’s promised big money to the areas where
the Government has been exposed for the past few months: health,
transport, education and community services. Egan must be saving Law
and Order for the budget proper in June.

There’s an increase of $572 million for health, with cuts to head
office and administrative efficiencies through reducing the number of
area health services. There’s an additional $300 million promised for
rail, and a billion worth of projects to untangle the city rail lines,
bringing 14 branch lines to 5 Rail Clearways. There’s an increase of
$356 million for education to achieve the smaller class sizes promised
at the last election, and the 5.5% wage increase awarded to teachers.

And even though they aren’t in the spotlight at the moment, community
services gets an extra $41 million and ageing and disability gets an
extra $88 million. These increases can be traced back to the last week
before the election last year when the Opposition proposed cuts into
community services. At the time, Egan and his Chief of Staff, Michael
Coutts Trotter, went spare; Egan was still railing against the
Opposition’s policy as late as October last year:

“On the Thursday before the election, the Opposition produced its
costings document and in that document were savings of $700 million
that it was going to achieve by slashing the extra DOCS workers. The
Opposition announced that two days before the election, on the very day
that both Houses rose. The Opposition left it to the last minute, so
that nobody in New South Wales would know anything about it. It is no
wonder that every time this is mentioned, Opposition members go red in
the face. They have every right to feel utterly and completely ashamed
by what their leader did. But I assure them that they will wear it
forever.”

Community Services and Ageing and Disability can thank the Treasurer’s long memory for today’s enhancements.

Where today’s mini-budget is weak is on the expenditure side. Egan
anticipates $81 million from cuts to departmental budgets in the areas
of travel, printing and advertising. This is mere penny pinching of the
“turn out the lights at night” variety. He anticipates another $284
million from 20 specific measures including the closing government
office’s in Tokyo and London, cancelling the multicultural arts
festival, Carnivale, and abolishing the Department of Women and
establishing in its stead an Office of Women in the Premier’s
Department. No doubt about it – this is a budget that is tough on women
and wogs.

More sensible are the decisions to create a Department of Primary
Industry, by amalgamating Agriculture, Fisheries, Mineral Resources and
State Forests, and streamlining the administration of crown lands and
catchment authorities. The fact that there are savings to be made just
adds to the benefits of these decisions.

Where the Government would love to have more room to move is in the
area of redundancies. Their policy of “no forced redundancies” means
that there is considerable fat in public sector employment, with
outplaced staff filling Lego rooms across the state. A timid move is
made on this front by tightening salary maintenance provisions, but you
sense that the Government wants to do much more on this front. In any
event, the Government’s going to be putting the hard word on the Labor
Council and the public sector unions: there’ll be no room for wage
increases in this budget cycle.

It’s a mini-budget that will see NSW with a $300 million deficit,
which, after nine successive surplus budgets, pains Egan no end. But
what could have been an exercise in manufacturing a crisis has turned
into a clever budget: neutralising some of the criticisms that the
Government was hooked on stamp duty receipts, introducing more
flexibility into the land tax system; and announcing big budget
enhancements in the areas that have plagued the Government during the
past year. But, the Budget in June will have to look harder and cut
deeper into the expenditure side. Otherwise Egan will be delivering
deficit budgets for a few years yet.

Boilermaker Bill is at [email protected]

Peter Fray

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