OLD PAGES > Business Reaction to 2007/08 Budget - 19 Jun

The Illawarra’s largest business group, Illawarra Business Chamber said today’s State Budget was a strong document in terms of infrastructure and the containment of government expenditure, but weak in terms of reducing the tax burden on NSW businesses.

• Taxation - massive $ 4.5 billion increase in revenues, but no business taxation relief
• Payroll tax collections – to increase by a total of 29% or $1.6 billion over the next four years
• Expenditure - growth contained
• Infrastructure – strong investment, more future planning required

“The Budget is in surplus, expenditure has been contained, a strategy for significant infrastructure investment is in place, yet despite $4.5 billion in additional revenue, the Government has refused to provide taxation relief for NSW and Illawarra businesses who pay the highest rates of taxation in Australia, according to Illawarra Business Chamber CEO Mark Grimson.

“The NSW Government is fortunate that the economy has turned and in part I attribute that to the employment growth despite the ongoing debate on workplace reform.

“Whilst the taxation equation is a disappointment, this Budget is not without merit. IBC commends the Premier for driving an infrastructure strategy focused on improving the economic position of NSW and in seeking greater private sector involvement through the use of public private partnerships (PPPs).

An analysis of key components of the State Budget is below:

Revenues

“This is strong revenue growth on the back of a rebounding property market, strong employment growth and higher than expected State Final Demand figures.

Payroll Tax

“IBC is disappointed that the reversal in the State’s economic fortunes did not pave the way for a cut to payroll tax as a demonstration that NSW really is ‘open for business!’

“The NSW Payroll Tax rate is the highest in Australia and with each year the Government becomes increasingly reliant on this tax, with collections projected to increase by 29% over the coming four years.

“NSW can afford to cut payroll tax by 0.25% from 6.00% to 5.75% and it would only cost approximately $240 million per year. Such a cut is responsible and affordable.

“Whilst other Australian states are cutting this tax, NSW is expanding its tax take. In the medium to longer term, this differential with other Australian States will have an increasing impact on the competitiveness of Illawarra businesses.

“The government appear to have brought expenditure growth under control. Time will tell if this is a temporary lull in growth or marks a real change in government culture. “One of the brakes on expenditure is in fact individual agreement making which ensures that wage increases provided in our sector do not automatically flow through to all workers.

Infrastructure

“The Government’s approach is sound and well considered. It represents real progress in the delivery of the State Infrastructure Strategy.

At a local level, IBC particularly welcomes;

• $45 million for the construction of the Oak Flats to Dunmore section of the Princes Highway
• $30 million for the construction of the next stage of the Northern Distributor
• $3.4 million towards planning of the Gerringong to Bomaderry section of the Princes Highway
• $60.8m towards the Port Kembla’s further expansion.
  

Mr Grimson said that while these allocations to these existing projects were welcome, given the budget position had now turned around significantly, it was now time to take a closer look at the region’s longer term infrastructure requirements. IBC will be seeking discussions over the coming weeks with local MP’s to look at the issue of longer term infrastructure planning.

For further information contact Mark Grimson on 4229 4722 or 0409 155240