It's amazing what a bit of money in the pocket can do to a politician with their hands on the economic levers.
We have seen it in Canberra with the Federal Treasurer, Peter Costello's largesse on things like superannuation, tax cuts and education in the past two federal budgets.
Yesterday we saw NSW Treasurer, Michael Costa move from being 'scrooge' and resistant to calls for tax cuts on property and in other small, but meaningful areas, to pulling rabbit after rabbit out of his budget hat.
And all due to a tax on the sale of Sydney airport that hasn't arrived, and might not yet for a while, and a surge in the stockmarket.
And some perhaps unrealistic forecasts of smaller than expected wage rises for state public servants.
From a forecast deficit of almost half a billion dollars six months ago, Mr Costa estimated the 2007-08 NSW budget would be in surplus by around $440 million.
That's a billion dollar turnaround.
The main source of additional revenue was $750 million in transfer duties, with more than half of this coming from the sale of Sydney Airport to a consortium led by Macquarie Bank.
Despite the $5.6 billion sale occurring years ago, the Office of State Revenue has only got around to making its transfer duty assessment.
The deal was determined to be a property transaction, not a share transaction, so with property deals paying a higher rate than shares, NSW will receive around$400 million.
A fortuitous piece of timing.
And while Macquarie Bank and its partners are disputing the assessment and haven't paid the bill, the Federal Government will have to pay the cost because it agreed to pay the transfer costs to smooth the sale of the airport.
So Mr Costa will effectively 'gouge' the Howard Government and is also allowed to include the higher amount in the budget under accounting rule.
The second-largest gain was an extra $466 million from the surging sharemarket. The NSW Treasury earned 51 per cent more than it had forecast. Most of this has come in the June half as the market has surged after being relatively depressed in the December half.
So, armed with effectively a billion dollars or more, Mr Costa flicked the switch and moved from 'scrooge' mode to tax cutting hero.
The timetable for ending mortgage duty was accelerated and from September 1, mortgage duty on the purchase of owner-occupied homes will be axed, delivering a $2000 saving on a $500,000 loan and $1000 on a borrowing of $250,000.
The NSW government had previously announced it would eliminate mortgage duty, but the Budget brings this forward by 18 months in an effort to stimulate the sluggish real estate market.
Duty on residential investment property will also be removed from July next year and commercial property 12 months later.
That will cost$138 million in 2007-08 and$1.36 billion over the next four years of Budget estimates.
But as they say in the advertorials on early morning TV, 'wait, there's more'
The land tax rate on investment property will be cut from 1.7 per cent to 1.6 per cent from 2008, meaning a small gain for investors.
This will cost$465 million over four years.
Other duties – such as on the hire of cars,DVDs and a myriad smaller items will be abolished from July and will cost$570 million between now and 2011.
The budget will spend more on transport, as well as health and education. Most of this had already been announced or leaked in the lead-up to the March election and the Budget. The total bill – about $50 billion.
Much of the extra spending will be funded by debt – $20 billion of it over four years.
NSW debt burden will double from4.9 per cent to 9.8 per cent by 2010-11.That could put pressure on the state's AAA credit rating.
Mr Costa claims the NSW economy's will grow from the below par 2.5 per cent this financial year to 3.5 per cent in 2007-08.
That will still be under the national average of 4 per cent forecast by the Federal Government.
But the impact of the heavy rain and better than expected grain harvests this summer might raise the growth figure next financial year..
Certainly unemployment is already doing better than forecast: It fell below five per cent in May to 4.9 per cent. Mr Costa forecast a rate for 2007-08 of five per cent.
That's well above the estimated national rate of less than 4.5 per cent, but it's a bit better than what would have been expected three months ago.
The question now is whether the mortgage duty cuts will dry up house sales over the next year before the cuts come into being on July 1, 2008, or whether activity continues for most of the year but slows ahead of the reduction?
