NSW fares worst as state budgets blow-out
September quarter figures released by the Bureau of Statistics show state and local governments went backwards in the September quarter in terms of their fiscal bottom line, however NSW suffered the biggest plunge.
In NSW, the total revenues of the state government and local councils slid almost 2 per cent from the same quarter a year earlier, yet spending increased by 7 per cent - the highest growth of any government in Australia outside the ACT.
The bureau figures show the economic slowdown is hurting state and local governments. Spending growth in the other states averaged 2.2 per cent - Queensland's spending was down 1 per cent - but even that was higher than their growth in revenues. Every state's deficit grew.
Between them, Australia's state and local governments ran up $2.6 billion in operating deficits in the September quarter, improving to end just $334 million in the red for the December quarter. Individual state figures for the second quarter are not yet available.
The bureau estimates consumption spending by governments fell by another 0.2 per cent in the December quarter, in real terms after seasonal adjustment, on top of a 1 per cent fall in the first quarter.
Investment rebounded 2.2 per cent, but only after plunging by 16 per cent in the previous quarter. This implies government activity, which accounts for 20 per cent of the economy, was flat in the December quarter after going backwards in September.
This was offset by a stunning 85 per cent jump in investment by government corporations, although much of that was in purchases of private sector assets rather than new investment.
NSW Treasurer Mike Baird announced in December the state expects to end up with a $775 million deficit for the 2012-13 financial year, followed by a $423 million deficit in 2013-14.
The other states experienced much smaller declines, although both territories also had their budget position deteriorate rapidly. Only the Commonwealth, Western Australia and the territories recorded significant growth in tax revenues compared with a year earlier.
Frequently Asked Questions about this Article…
The ABS September-quarter data shows NSW suffered the biggest plunge because total revenues for the state government and local councils fell by almost 2% year‑on‑year while spending jumped 7% — the highest growth of any government in Australia outside the ACT. That combination pushed NSW’s budget position sharply backwards.
According to the article, NSW government and local councils experienced about a $1.5 billion turnaround in their budget balances in the first quarter, with revenue declines and higher spending contributing to the deterioration.
The Bureau of Statistics figures show Australia’s state and local governments ran up $2.6 billion in operating deficits in the September quarter, then improved to finish just $334 million in the red for the December quarter. The data also show every state’s deficit grew over that period.
Government consumption spending fell by 0.2% in the December quarter (after a 1% fall earlier), while investment rebounded 2.2% following a 16% plunge in the previous quarter. Because government activity accounts for around 20% of the economy, these swings can influence overall economic demand and sectors that rely on public spending — something everyday investors often watch.
The article notes the stunning 85% increase in investment by government corporations was largely due to purchases of private‑sector assets rather than new capital investment, so much of the rise reflected asset transactions rather than fresh infrastructure spending.
Treasurer Mike Baird announced in December that NSW expected to finish the 2012–13 financial year with a $775 million deficit and record a $423 million deficit in 2013–14.
Other states saw much smaller declines: spending growth across the other states averaged 2.2% (Queensland’s spending was down 1%), but even those states generally had revenue growth lagging spending. Only the Commonwealth, Western Australia and the territories recorded significant growth in tax revenues compared with a year earlier.
Investors should track key indicators the article highlights: state and local government revenue growth, spending growth, quarterly ABS operating deficit figures, government consumption and investment trends, and any large asset purchases by government corporations — all of which can signal shifts in fiscal pressure and public‑sector demand that affect markets and the economy.
Call 1300 880 160
Start a chat
Schedule a call
