UNFINISHED BUSINESS · 2014. 3. 19. · $1.8 billion for the WestConnex motorway project $403 million for the upgrade of the Pacific Hwy $170 million for the Princes Hwy $135 million

Invigorating business

Call 13 26 96 nswbusinesschamber.com.au

UNFINISHED BUSINESS Towards 2015 and beyond

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Stephen Cartwright CEO, NSW Business Chamber

Introduction

The 2011 State Election saw the Coalition sweep to power for the first time in 16 years. NSW had voted for change and provided the Coalition with a decisive electoral mandate to deliver reforms to rebuild the economy, return quality services, renovate infrastructure and, perhaps most importantly, restore accountability to Government.

With our highly successful “10 Big Ideas to Grow NSW” and “NSW Deserves Better” campaigns, the NSW Business Chamber led the advocacy agenda in the lead up to that election. The Chamber has keenly followed the progress of the Government over its first term, maintaining its engagement on behalf of business to ensure the implementation of key priorities.

The Chamber’s direct advocacy efforts have seen:

The appointment of a Small Business Commissioner for NSW: Providing an advocate within Government for the needs of small business

The reform of the NSW Workers Compensation system: preventing a $750m increase in premiums on employers and protecting 12,600 jobs

The elimination of vehicle registration stickers: leading to estimated savings of $5 million a year for NSW businesses or 160,000 hours of unnecessary red tape

Payroll tax reform: The 2013 Budget raised the payroll tax threshold from $689,000 to $750,000, exempting 1,300 new businesses from payroll tax and saving all payroll tax liable businesses an average of $3,325

Long term lease and sale of assets: The long term leasing and sale of assets have helped free up more than $4.6 billion for investment in new infrastructure.

These changes have been welcomed, however much remains to be done. With minor parties controlling the balance of power in the upper house, the Government’s legislative agenda, particularly over the second half of the term, has been severely curtailed. The landmark reform of the NSW Planning Act and sensible changes to rules around retail trading were both scuttled.

With an election set for 28 March 2015, its time for all sides of politics to commit to a positive agenda for economic growth. Together with our 15,000 strong membership, the NSW Business Chamber has identified the 5 key priorities business wants addressed by the Government over the next twelve months and in the next term.

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The NSW Business Chamber believes these 5 initiatives will help ensure NSW can attract the investment, develop the jobs and encourage the growth to support our growing population.

Fund and deliver more infrastructure across NSW through public asset swaps

Revitalise and reform Local Government

Deliver senior schooling more effectively to improve outcomes for young people

Improve NSW’s energy security and address pricing challenges

Put NSW on the front foot by creating a more competitive tax system

on an average NSW residential bill

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new ways to fund essential projects. Falling state revenues mean that recycling state assets to help fund new infrastructure is the most sensible way to deliver these projects without risking the budget bottom line.

The Government’s successful long term leasing of assets including Port Botany, Port Kembla and the Desalination Plant yielded more than $4.6 billion for new investment through the Restart NSW Fund. The Government’s commitment to only selling an asset for more than its retention value should be commended, but the same commitment now needs to be shown to the sale of the state’s ageing electricity network.

While some may point to the potential of a privatised energy network driving increases in electricity prices or reductions in reliability, most evidence shows privately owned electricity networks are more efficient. Network costs account for around 50% of an average residential electricity bill in NSW and those costs have been the main contributor to recent price increases. In Victoria, where networks were privatised in the 1990s, network costs over recent years have been tracking lower than in NSW and consequently have had less impact on electricity bills.

“The anticipated infrastructure construction pipeline in NSW over the next five years is about

$85 billion” The Hon Mike Baird, NSW Treasurer

Current estimates indicate that selling the electricity networks would provide more than

$25 billion

In the last three years, public asset swaps have provided:

$1.8 billion

for the WestConnex motorway project

$403 millionfor the upgrade of the Pacific Hwy

$170 millionfor the Princes Hwy

$135 millionfor the Bridges for the bush program

$100 millionfor infrastructure projects in the Illawarra

Between 2007/08 and 2013/14 electricity network costs have increased by around

$580

$2,500

$2,000

$1,500

$1,000

$500

$-Wholesale

energyNetwork Carbon Other

Green schemes

Retail Total

Changes in an average residential bill (2007/08–2013/14)

Data sourced from IPART 2007/08 2013/2014

Fund and deliver more infrastructure across NSW

through public asset swaps

With more than $85 billion projected to be spent on infrastructure over the next 5 years, NSW needs to identify

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the lowest of all states and territories

VIC631 Councillors

QLD561 Councillors

NSW1,475 Councillors283 more than VIC and QLD combined

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Revitalise and reform Local Government

As was recognised by the Independent Local Government Review Panel, Local Government in NSW needs a new agenda.

While options for reform may differ for metropolitan and regional councils, doing nothing is simply not an option. The current governance, financial and democratic structures of NSW’s 152 Councils are failing to meet the needs of the community.

NSW councils are facing an infrastructure backlog of more than $7 billion. Without establishing a new model of partnership between state and local government, opportunities to address the backlog will be missed and communities and the local businesses that support them will inevitably go backwards.

The Independent Local Government Review Panel, established during this term of Government, has charted the way forward to achieve this reform. It’s now time to put the politics aside and look to build a stronger, better resourced and more responsive system of local government.

In 2010 the Productivity Commission rated the relationship between NSW state Government and local governments at

42%,

of business respondents to the 2013 NSW Business Chamber Red Tape survey rated local government

very or extremely complex when acting as a regulator

Of the 152 Mayors in NSW only 34

are popularly elected

NSW Councils are responsible for more than

$130 billion of infrastructure and other community assets

A Treasury Corp analysis of councils financial

sustainability rated almost half as having a negative long term financial outlook

only 27% of NSW councillors are female compared to 51% of the NSW population

Since 1906 the number of councils in NSW has fallen from 327 to 152. The vast majority of mergers have, however, occurred outside of Sydney

41%2

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In 2012, the NSW Auditor General raised concerns about existing school arrangements and their capacity to meet the needs of students looking to undertake vocational education and training (VET). The Auditor General identified that there is evidence the current system requiring students to remain at school until 17 years of age leads to a greater proportion of students who are disengaged. Although school retention and Year 12 completion rates are important, it’s clear that more needs to be done to engage those students who are not focused on a university pathway.

Improvements however need to focus on more than simply student engagement. Policies that have emphasised engagement over vocational outcomes have led to industry concerns that the quality of VET delivered in schools is not to the standard required for employment.

The recent focus by the NSW Government on improvements to teacher quality arrangements and commitments by the Federal Government to reform VET in Schools are welcome but should be part of broader reform to improve student outcomes.

New research from the University of Melbourne has shown that VET in Schools is not sufficiently preparing Australian secondary school students for employment or further training.

The NSW Business Chamber’s “10 Big Ideas – Could do Better” report, released in 2011, recommended a broad ranging review of post-Year 10 education and training in NSW. Many of the issues identified in the report remain unfinished business, including improving career information, advice and guidance; implementing minimum achievement standards for literacy and numeracy; and adjusting the balance between general education and VET.

According to the latest COAG Reform Council Education Report

“26.7% of those aged 17 to 24 in NSW were not in full-time work or full-time study in 2011”

“Good career

advice helps students make

the right choice.”NSW Auditor - General’s Report 2012

Youth unemployment (15–24 year olds) currently stands at 16.8% in Parramatta, 16.5% in Illawarra, 14.1% in Far West Orana and 13.3% on the Mid North Coast

Enrolments in school based VET courses are increasing.In 2011 35.4% of students in Years 11 and 12 were undertaking VET courses compared to 33.8% in 2008

The HSC has not been reviewed since 1996

“In 2012, NSW school completion rates were below the national average for all students and all localities, with the exception of students from very remote locations” NSW Department of Education and Communities

Deliver senior schooling more effectively to improve

outcomes for young people3

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Improve NSW’s energy security and address

pricing challenges

Increasing energy prices have impacted significantly on the business community and have affected business competitiveness and productivity.

Gas is a critical input for many NSW manufacturers. With the gas market on the east coast undergoing a major period of transition, these businesses are likely to face significant pressures as gas prices rise and the potential for gas shortages becomes a distinct possibility.

NSW needs a strategy to ensure that gas users can access the gas they need, at a competitive price. With the eastern gas market opening up and commencing the export of gas, NSW gas users need to be confident that there will be adequate supplies available and that gas prices won’t be pushed up exorbitantly due to shortages in the market.

Implementing a regulatory regime that is based on scientific evidence and fosters the safe development of NSW’s abundant supplies of gas is absolutely critical for the future competitiveness of NSW industry. Ensuring that the process for project approvals remains robust but timely is also essential.

Around 95% of NSW’s gas supply is imported from

SA, QLD and VIC. 5% is sourced from AGL’s CSG plant at Camden, which has operated safely for more than 10 years

NSW gas users currently

demand about 137 petajoules (PJ) of gas each year.

NSW has almost 3,000 PJ of coal seam gas reserves

Natural gas demand is set to triple over the next three years

Gas prices are expected to rise by 50–100% between

now and the end of 2016

NSW will start seeing limitations in gas availability by around 2016 if further gas does not come online

If the event of a shortage of gas, the regulations state that gas will be ‘’turned off’’ for large industrial users before households and essential services.

If there are gas shortages, it will be business that carries the disruption

23%29%48%

Industry demands the most gas in NSW:

Source: AEMO, Gas Statement of Opportunities 2013

of gas fuels power generation

of gas fuels the industrial sector

of gas supplies the residential and small business sectors

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Put NSW on the front foot by creating a more

competitive tax system

The financial audit commissioned by the NSW Government in 2011 found “substantial opportunities to reform the tax base to achieve greater efficiency, equity and simplicity.”

With spending under control and the balance sheet secured, it is time for these opportunities to be realised.

Inefficient taxes on transactions and employment are a problem for all States, and major reform may require a national conversation – which NSW should lead.

But there are some areas where more immediate action is required to ensure that NSW businesses can compete on a level playing field.

Although reforms to reduce the payroll tax burden were welcomed in the 2013/14 NSW Budget, when compared to other states, NSW continues to have one of the highest rates and lowest thresholds.

Out of all the major states, NSW has the second highest payroll tax rate (behind WA) and the second lowest payroll tax threshold (behind Victoria).

NSW is one of the only States that still taxes insurance to pay for emergency services. This tax places an unfair burden on those who do the right thing by taking out insurance, while those who don’t get free emergency services.

Underinsurance in NSW has increased, despite falling in most other states.

Emergency services contributions add costs of around $700 million a year to insurance premiums.

Businesses pay a far higher share of these costs than they would under a property based levy.

Over the years, NSW Governments, both Labor and Liberal, have continued to defer the commitment to abolish business transfer taxes that are costing business collectively more than $350 million a year.

These taxes eat into the savings of retiring business owners, discourage efficiency improving mergers, acquisitions or restructures, and discourage start-ups that wish to exit through a trade sale from locating in NSW.

NSW raises around

$7 billion a year in payroll tax

Modelling for the 2010 Henry Tax Review found that

payroll tax was one of the most inefficient state taxes

Commonwealth Grants Commission figures suggest that in 2011–12 NSW businesses and households paid around

$1.2 billion a year more than they would if NSW applied the average tax policy of other States

The Institute of Public Affairs found that in 2012–13 a model business used to compare tax regimes internationally would pay

almost $7,000 more tax in NSW than the average of other States

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Invigorating business

NSW Business Chamber 140 Arthur Street North Sydney NSW 2060ABN 63 000 014 504

Locked Bag 938, North Sydney NSW 2059DX 10541 North Sydneyt 13 26 96 f 1300 655 277 e [email protected]

Call 13 26 96 nswbusinesschamber.com.au

NSW Business Chamber Tracing our heritage back to 1825, NSW Business Chamber’s mission is to create a better Australia by helping businesses maximise their potential. The Chamber is a passionate advocate for business in the public arena: whether standing up to government and decision makers when business interests are neglected, or working together to create positive change.

On a one-to-one basis, the Chamber helps all businesses from small enterprises to large corporations. Our commercial services division, Australian Business Solutions Group (ABSG), delivers a range of business services to both member and non-member clients throughout Australia, with the operating surplus going back to supporting Chamber initiatives. In all, we believe it’s important for Australia’s business community to succeed, because prosperity creates new jobs, social wealth, and better communities in which to live.

• Local, regional, state and national coverage• Public policy and advocacy• Reducing complexity to manage risk• Empowering business through connections, knowledge and expertise

Let the NSW Business Chamber team be an extension of your business so you can concentrate on what you do best – growing your business.