nav-icons nav-icons
Progress in Political Economy (PPE) Progress in Political Economy (PPE)
LOGIN REGISTER
LOGIN
REGISTER
linklink
  • Home
  • About
  • Manchester University Press Book Series
  • Past & Present Reading Group
  • A Political Economy of Australian Capitalism
  • Journal of Australian Political Economy (JAPE)
    • Journal of Australian Political Economy (JAPE)
    • JAPE Issues
    • JAPE Submission Guidelines
    • JAPE Young Scholar Award
  • Australian IPE Network (AIPEN)
  • Forums
    • Forums
    • Debating Anatomies of Revolution
    • Debating Debtfare States
    • Debating Economic Ideas in Political Time
    • Debating Making Global Society
    • Debating Mass Strikes and Social Movements in Brazil and India
    • Debating Social Movements in Latin America
    • Debating The Making of Modern Finance
    • Debating War and Social Change in Modern Europe
    • Feminist Global “Secureconomy”
    • Gendered Circuits of Labour and Violence in Global Crises
    • Scandalous Economics
    • The Military Roots of Neoliberal Governance
    • Politicising artistic pedagogies
  • Literary Geographies of Political Economy
  • PPExchanges
  • Pedagogy
    • IPEEL Of The Environmental Crisis
    • Five Minute Honours Theses
    • Piketty Forum
    • Radical Economics Pedagogy
    • Unconventional Wisdom
    • Journal Club
    • Marxism Reading Group
  • Wheelwright Lecture
  • Events
  • Contributors
  • Links
    • Political Economy At Sydney
    • PHD in Political Economy
    • Master of Political Economy
    • Centre for Future Work
    • Centre for the Study of Social and Global Justice (CSSGJ)
    • Climate Justice Research Centre (UTS)
Open Letter on the Benefits of Promoting Faster Wage Growth
Previous
Labo(u)r and neoliberalism
Next

Two ways to fund NSW election promises as the housing market falls

by Gareth Bryant on March 21, 2019

Two ways to fund NSW election promises as the housing market falls

Gareth Bryant | March 21, 2019

Tags: Australia
Australia
| 0 201

State elections are always about spending promises, but this time not much is being said about how they will be funded.

Last minute costings on individual announcements tend to rely on the general presumption that the state economy will keep growing and somehow produce the needed revenue.

This is evident in the costings released by the NSW Parliamentary Budget Office, which show that new spending promises from both major parties exceed new revenue promises.

The Labor Party has managed to find some new revenue through increased taxes on luxury cars, boats and vacant properties, while the Coalition has unveiled no new revenue initiatives at all.

While the property market has been climbing this needn’t have mattered that much. But for the past 20 months Sydney prices have been falling, and the pace of buying and selling houses has also declined.

As a result, projected stamp duty revenues – a tax on property transactions – are being repeatedly revised downwards. The latest wipes A$9.5 billion off what was expected at the time of the 2017 budget.


NSW state revenue by type, A$ billion

University of Sydney Policy Lab

Austerity, or an alternative?

It’s looking as if the incoming NSW government will come under pressure to moderate spending including spending on essential services and infrastructure, but there might be a way out.

Today, we published a new report for the Sydney Policy Lab outlining two ways in which the NSW government can ready its budget for a post-housing boom economy.

Politicians of all parties tell us that fiscal rules create binding constraints for state governments and they are right.

But there are imaginative ways to strengthen state finances and to interpret those constraints.

Alternative 1: taxing residential land

Although land used for holiday homes and rental properties faces land tax, land used for owner-occupied housing is exempt in NSW, meaning as much as A$1 trillion of land is exempt.

It is a source of wealth – one of the few covered by state tax powers – that the budget can no longer afford to ignore.

Extending NSW land tax to owner-occupied residences with safeguards could fund much of the state’s needed service and infrastructure spending and wind back the outsized reliance on stamp duty.

With so many people locked out of home ownership altogether, it would make the tax system fairer.

Alternative 2: redefining ‘investment’

Under NSW budget rules spending on services is defined as cost that needs to be matched by immediate revenue. Spending on infrastructure, often on infrastructure which will later be privatised, is defined as an investment, meaning it doens’t have to be matched by immediate revenue.

It is why there is talk about a squeeze on services in the midst of record spending on infrastructure.

There’s room to change those definitions.

While there are good macroeconomic and budgetary reasons to differentiate day to day spending from investments, much of what is defined as day to day spending is in fact an investment.

There’s no reason why the state’s power to borrow to invest in infrastructure couldn’t also be used to invest in public services like health and education. With a change of rules, governments could borrow to invest in nurses and teachers at interest rates currently reserved for toll roads.

First steps

A practical starting point would be to connect spending on public services to the savings they create in other parts of the state budget, and account for this as the return on the investment.

As an example, “justice reinvestment” could fund programs aimed at reducing Indigenous incarceration out of the savings those programs would eventually deliver in other areas.

The redefinition would remove the present bias towards programs that build only physical infrastructure that has to be paid for later with tolls or privatisations.

Both ideas could help whichever party or parties form government after Saturday’s election, and help NSW. Without them, budgeting will become more difficult.

Co-authored by Gareth Bryant and Frank Stilwell

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Share this post

  • Tweet
  • Share Post:

Author: Gareth Bryant

Gareth Bryant is a political economist at the University of Sydney. He works as a senior lecturer in the Department of Political Economy and as economist-in-residence with the Sydney Policy Lab.

Related Posts

 

Postdoctoral Research Associate – Australia’s Climate Economy

Full time (Part Time negotiable), Fixed term for 3 years Work with a team of interdisciplinary researchers and doctoral students building a conceptual and empirical map of the eme...

 

Open Letter: The Coalition’s Nuclear Plan Doesn’t Add Up—Spend the Money on Household Clean Energy Instead

In the wake of the Government's announcement of its Cheaper Home Batteries Program, 60 Australian economists have signed a letter comparing the economic consequences of pursuing nu...

 

Open Letter on Future Made in Australia

We are economists, political-economists and policy specialists in related fields, writing to express our support for active measures to strengthen Australia's manufacturing capabil...

 

The Federal Budget: seeking ‘return to normal’ or radical reform?

The budget delivered this week by the Federal government aims to get the economy ‘back to normal’. Is this the right goal? What if the old ‘normal’ was deeply flawed, a...

Comments

Leave a Response Cancel reply


Join our mailing list

© Progress in Political Economy (PPE)

Privacy | Designed by Nucleo | Terms and Conditions

  • Home
  • About
  • Manchester University Press Book Series
  • Past & Present Reading Group
  • A Political Economy of Australian Capitalism
  • Journal of Australian Political Economy (JAPE)
    • Journal of Australian Political Economy (JAPE)
    • JAPE Issues
    • JAPE Submission Guidelines
    • JAPE Young Scholar Award
  • Australian IPE Network (AIPEN)
  • Forums
    • Forums
    • Debating Anatomies of Revolution
    • Debating Debtfare States
    • Debating Economic Ideas in Political Time
    • Debating Making Global Society
    • Debating Mass Strikes and Social Movements in Brazil and India
    • Debating Social Movements in Latin America
    • Debating The Making of Modern Finance
    • Debating War and Social Change in Modern Europe
    • Feminist Global “Secureconomy”
    • Gendered Circuits of Labour and Violence in Global Crises
    • Scandalous Economics
    • The Military Roots of Neoliberal Governance
    • Politicising artistic pedagogies
  • Literary Geographies of Political Economy
  • PPExchanges
  • Pedagogy
    • IPEEL Of The Environmental Crisis
    • Five Minute Honours Theses
    • Piketty Forum
    • Radical Economics Pedagogy
    • Unconventional Wisdom
    • Journal Club
    • Marxism Reading Group
  • Wheelwright Lecture
  • Events
  • Contributors
  • Links
    • Political Economy At Sydney
    • PHD in Political Economy
    • Master of Political Economy
    • Centre for Future Work
    • Centre for the Study of Social and Global Justice (CSSGJ)
    • Climate Justice Research Centre (UTS)