The upcoming NSW budget will be a test of whether the government keeps building or moves into austerity, the head of an urban policy think tank says.
The budget will be Treasurer Matt Kean's first, and the government's last before the next state election in March 2023.
Mr Kean took over as treasurer after Dominic Perrottet became premier following the resignation of Gladys Berejiklian in October last year.
Delivering last year's budget, Mr Perrottet declared "NSW is back".
"We are back to growth and back on track," the now premier said.
The next day, coronavirus restrictions returned after cases spiked in the eastern suburbs, growing into an outbreak that would force all of Sydney, and eventually the entire state of NSW, into lockdown.
The state's recovery from the pandemic is well underway but the real budget risk for the government this year is complacency, Gabriel Metcalf, CEO of urban policy think tank Committee for Sydney, says.
The government has spent big to get the state through the pandemic, but there is now a risk it will switch into 'austerity mode'," Mr Metcalf said.
The government needs to build on the investment in the Sydney Metro by building out a complete public transport network "which allows people to get from anywhere to anywhere", he said.
Projects like Sydney Metro provide a better way to move around as well as creating a framework for future population growth and housing supply, Mr Metcalf said.
"To become a mature public transport city will require continued expansion of the system, as well as the feeder network that gets people to and from rail stations," he said.
The budget will demonstrate whether the government has the appetite to continue investing in big infrastructure projects.
But it is cost of living pressures Mr Metcalf expects to dominate the next election.
State governments have little ability to combat inflation or wages, he said, but they can make meaningful impacts on the cost of living.
Rather than providing short-term responses to cost of living pressures, the state's budget should focus on reforms to increase productivity while making it cheaper to live and work in Sydney.
"Real affordability depends on lowering the two biggest items in household budgets: housing and transport," Mr Metcalf said.
Mr Perrottet spent much of his time as treasurer attempting to abolish stamp duty in NSW with the goal of replacing it with a land tax.
He has argued stamp duty, which can be the biggest out-of-pocket expense for homebuyers, impedes people from entering the property market.
Stamp duty is a lucrative revenue stream for the government but Mr Metcalf argues land tax is more stable.
The government also needs to find money to address the demands of the state's workforce, with healthcare, transport and education workers all seeking a pay rise above the 2.5 per cent cap on public sector wages.
Mr Perrottet has suggested some relief is coming in the budget however warned it is unlikely to fully appease the demands of various unions recently engaged in industrial action.
The NSW budget is due to be handed down on June 21.
Australian Associated Press
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