NSW budget: less flash but still some cash for infrastructure and energy

However, the forecast deficit in the new budget marks an improvement from the state government’s A$10.1bn and A$15.3bn deficits of financial years 2022-23 and 2021-22 respectively.

Despite forecasts of slower economic growth, largely underpinned by lower household consumption forecasts, energy has emerged as a key winner from this budget. The state government has also committed a significant amount of funding for home building and infrastructure projects in the transport, health and education sectors, with a focus on Western Sydney.

New South Wales’ 2023-24 energy sector budget

Delivering on its election promise, the state government has allocated a further A$1bn towards establishing the Energy Security Corporation (ESC), a state-owned body set up to invest alongside the private sector in renewable energy projects in NSW. The A$1bn commitment is funded by the Restart NSW Fund, which was established in 2011 to recycle state owned infrastructure assets through privatisation. The ESC is expected to provide much-needed public sector support for storage projects such as battery storage systems and pumped hydro, which are critical for successful implementation of the state’s Electricity Infrastructure Roadmap.

The government has also committed A$804m to fast track the development of NSW’s Renewable Energy Zones (REZ). The funds will be allocated to the Transmission Acceleration Facility, which was established in 2022 as an investment vehicle administered by EnergyCo to fund the early development of critical infrastructure needed for NSW’s renewable energy transition. The A$804m allocation increases the total amount provided to the facility since its inception to A$2bn.

EnergyCo is expected to allocate funding to critical infrastructure needed for the establishment of REZs, including the overhead transmission lines needed to connect these projects to the grid.

Earlier this month, the state government released its response (19-page / 457KB PDF) to this summer’s independent Electricity Supply and Reliability Check Up report (‘Reliability Check Up’) (128-page / 4.4MB PDF), which it commissioned to consider the current overall policy programme for energy sector transition. The government’s response included a commitment to ensure the Electricity Infrastructure Roadmap of 2020 is successfully implemented.

Despite the A$1.8bn allocation towards energy transition, Premier Chris Minns has acknowledged that NSW is still behind on achieving its 2030 objectives. The Government has accepted a recommendation from the Reliability Check Up to fund the operation of the Eraring Power Station (Eraring) following its planned closure by Origin Energy in August 2025. While it is clear that the delays in executing NSW’s renewable energy transition pose reliability concerns associated with the closure of Eraring, it is currently unclear how long the extension will be required for and how much it will cost. As reported prior to its release, the budget also includes an increase in royalty rates paid by coal miners by 2.6% from June 2024. This is the first increase in NSW coal royalties since 2009 and is expected to provide an additional A$2.7bn towards the budget between 2017 and 2028.

New South Wales’ 2023-34 infrastructure budget

The budget provides for A$116.5bn investment in essential infrastructure projects over a four-year period.  

Announced expenditure on critical projects includes:

• Sydney Metro: following the publication of the Sydney Metro Interim Report on 1 August, which found that this critical transport project is suffering programme delays and cost blowouts, an additional A$1.0 billion has been allocated to Sydney Metro City and Southwest in 2023-24. According to the Interim Report, this additional funding may impact on Sydney Metro West procurement schedules and plans. In total, A$13.7bn will be spent on Sydney Metro over four years to 2026-27
• Parramatta Light Rail: an additional A$200m is allocated to Stage 2 of the project to expedite planning of its procurement, construction and delivery. Although it does not include a timeline for completion of the project, the Budget paper announced that planning approval for the entire project is expected in early 2024
• Western Harbour Tunnel Upgrade: A$4.7bn has been committed to this project over four years. The first two packages of the tunnelling works include construction of 1.7 kilometres of mainline tunnels, northern tunnels, the marine works and all the tunnel fit-out.

These investment decisions follow the NSW Strategic Infrastructure Review, which was tasked with identifying projects and programs which should be cancelled, delayed or descoped and has led to the delay or descoping of projects worth over A$2.5bn. The budget includes measures aimed at addressing the impacts of the housing crisis and the pressure on the health system.

In housing, A$610.1m will be invested to building around 1,500 permanent social housing dwellings. This will be part of the Australian government funded Social Housing Accelerator Agreement. A detailed plan is yet to be released on this social housing commitment.

In hospitals, building and upgrading healthcare facilities is one of the main focuses of the budget. The government has allocated A$13.8bn over four years to invest in health infrastructure. This includes additional funding for the building of Rouse Hill Hospital, bringing the total allocated to this project to A$700m. Other new hospital projects are: 

• A$1.3bn over four years to rebuild Bankstown hospital on a new site;
• A$1.0bn over four years to build the Nepean Hospital and Integrated Ambulatory Services Stage 1 and 2;
• A$740m over four years for the Liverpool Health and Academic Precinct; and
• A$438m over four years for the Shoalhaven Hospital Redevelopment.

Plans to invest in Western Sydney infrastructure are a key feature of this year’s budget. As well as Sydney Metro West and Rouse Hill Hospital, the government has also allocated budget to the projects including A$302.7m for Western Sydney Airport’s bus and rapid bus network, A$2.4bn over four years to improve roads as part of the ‘Connecting Sydney Roads’ program (A$429.8m in 2023-24), and A$3.5bn in the education sector.

Co-written by Felix Kafka and Sunny Shan of Pinsent Masons.