NSW budget cuts payroll tax and stamp duty and delivers preferred purchasing policy for SMEs

The NSW Budget has delivered on consolations to small businesses but the Government’s promise to deliver spending cuts has been questioned.

Business groups have described the payroll tax cuts in New South Wales as welcome but moderate and have questioned whether the State can deliver on its promise of cutting spending by 1.5% by consolidating public agencies and conducting a line-by-line examination of government spending.

The budget made good on a previously-announced promise to cut payroll tax from 5.75% to 5.65% on 1 January, 2010 and then cut the rate to 5.5% on 1 January, 2011. The payroll tax threshold will also be indexed to ensure the value of the cuts is maintained. It is expected the cuts will save business around $2.7 billion over the next five years.

The property sector has also welcomed cuts to stamp duty that are designed to stimulate the state’s struggling property sector. For at least the next six months, stamp duty will be cut by 50% per dwelling for investors and homeowners buying newly-constructed properties worth up to $600,000.

The saving, worth up to $11,245 a property, will not be extended to first home buyers who already receive stamp duty concessions. However, first home buyers will continue to receive an additional $3000 for the purchase of newly-constructed dwellings up to 30 June, 2010.

As predicted, Treasurer Eric Roozendaal also unveiled a plan to spend $62.9 billon on infrastructure over the next four years to help boost the state’s flagging economy. Roozendall is predicting deficits of $990 million in 2009-10 and $116 million in 2010-11, before returning to a modest surplus the following year. But unemployment is expected to hit 8.5% in 2010-11 as the Australian economy slows.

“It is a serious budget for serious times … this is also a budget to give hope,” he told the NSW Parliament. “A plan to weather this crisis together. It’s a charter for growth and a road map to recovery.”

But business groups are less than convinced that the Government’s plan to cut public sector spending – dubbed the Better Services and Value Plan – will be completed and are angry at the State’s escalating public sector wage bill.

“There is very little detail about how the Better Services and Value Plan will be different from previous attempts to make the NSW public sector more efficient,” Australian Industry Group NSW director Mark Goodsell says.

“The long-term success or otherwise of the Government’s budgetary strategy will depend very much on the outcome of this initiative.”

One initiative welcomed by the AIG was the Government’s Local Jobs First government procurement plan, which will give preferred treatment to more than 500,000 businesses in New South Wales.

“The new procurement policy is part of a positive focus on how the Government procures its goods and services,” Goodsell says. “AIG supports the Government’s view that local businesses should be ‘able to fairly and reasonably compete to provide the goods and services required by agencies’.”