Wednesday, June 9, 2010

Mostly Harmless

The New South Wales budget handed down yesterday afternoon by Treasurer Eric Roosendaal could perhaps be best described in the words of the late author Douglas Adams as “mostly harmless.” Previously made commitments have been met, without any spectacular Easter eggs, while returning the budget to surplus earlier than expected, largely through good fortune rather than good management. Increased revenue from the GST along with the proceeds from transactional taxes levied on the resurgent property market have taken the pressure off the Government just in time for the lead up to the election early next year.

The most dazzling piece of policy to emerge from the budget has been the decision to eliminate stamp duty temporarily on all purchases of property off the plan, and discount the duty for properties already in the process of construction. The aim is to provide a real incentive to encourage new construction, which will boost jobs and economic activity while also increasing overall property supply, and hopefully improving home affordability. It’s very much a “win-win-win” situation, and even the government could come out ahead if there is sufficient increased activity in the overall market to offset the concessions.

Coupled with the $20 000 cap on Section 94 developer contributions to councils, there is every chance these measures will have the desired effects of better and more affordable housing supply, while at the same time fostering further economic recovery. However, there is a catch. The councils who depend on Section 94 contributions are now sticking up their hands and demanding to know just how they can be expected to pay for community infrastructure and services when the rates they charge are pegged, and the developer levies are scaled back. And they have a point.

The recent decision to shift the responsibility for rate pegging to the Independent Pricing And Regulatory Tribunal was a step in the right direction, but sooner or later councils must be given the power to set their own rates, and be directly answerable to their constituents. Until that happens, the State government must continue to be held accountable for the infrastructure shortcomings that plague the state of New South Wales at every level. And infrastructure of every kind is the big gap in this budget.

Perhaps they know they won’t be around to worry about it after next March.

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