NSW, Queensland Tax: Housing and exports - tale of two states
NSW state Labor government is a bad political joke but the resilience of the nation's biggest state economy has allowed Eric Roozendaal to return the budget to surplus two years ahead of schedule and get through the global crisis with his AAA credit rating intact.
Now NSW needs to remove the various choke points to housing development in Sydney that are restricting construction and pushing up prices.
The NSW budget expects dwelling construction to "grow strongly" next financial year. If it doesn't, NSW could yet derail the national economic recovery, as Canberra's budget stimulus wanes and interest rates continue to rise.
The reliance on a housing-led recovery has driven the NSW Treasurer to cut stamp duty on new dwelling purchases.
Perhaps even more important was last Friday's move, drowned out by another bout of ministerial scandals and resignations, to limit housing developer charges, which can reach $60,000 a lot.
Local council development charges will be capped at $20,000 a lot while the pegging of council rates will be eased. In effect, housing development charges will fall more on all ratepayers and less on new home buyers.
Queensland used to be a boom state, but that also makes it more volatile. And yesterday's budget delivered by Treasurer Andrew Fraser does not tip a surplus until 2015-16.
Fraser has to deal with the spending pressures from Queensland's rapid population growth - 2.7 per cent in the latest year compared with 1.7 per cent for NSW. That's why Queensland jumped at Kevin Rudd's plan to make Canberra the dominant funder of hospitals.
Fraser's problem is that his scheduled export-led recovery, resting on sharply higher coal prices, is threatened by the Prime Minister's 40 per cent resource super-profits tax.
This threatens Queensland's hopes to build a liquefied natural gas industry out of its coal-seam gas deposits, given that Western Australia's offshore LNG industry will be able to remain under Canberra's less onerous 40 per cent petroleum resource rent tax.
Queensland's budget says the details of the new tax, particularly the rate at which the super-profits tax kicks in, need to ensure that "current production and planned and new investment in the mining industry are not deterred".
That is, Queensland wants a PRRT-style tax, which taxes profits less than Rudd's resource super-profits tax (RSPT), in return for not guaranteeing tax credits for project losses.
Sydney's banking sector has not been hit that hard by the global financial crisis. But Queensland's regional banks - Suncorp and the Bank of Queensland - have put the brakes on local commercial property lending.
This partly explains why Roozendaal can forecast that the NSW economy will bounce back above the state's 2.75 per cent long-term trend growth rate in the coming financial year.
In contrast, Fraser's budget forecasts that Queensland's economy won't reach its 4.5 per cent trend growth rate until 2011-12.
These two states, with the biggest infrastructure budgets, both face big challenges.
Politically dysfunctional NSW fluffed the chance to sell off its state-owned power industry to help finance desperately needed urban transport infrastructure in and around Sydney.
Queensland is in the process of trying to sell $15 billion of rail freight, forestry, port and road assets to reduce its debt and hopefully win back its AAA rating.