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NSW counted Sydney Metro property sales twice. It was a $1 billion mistake
The NSW Labor government has stumbled across a $1 billion mistake in the budget which means the state’s net debt has been underreported for five years after property sales for Sydney Metro were counted twice.
The sales of buildings above train stations for the Sydney Metro were accounted for when contracts were exchanged in 2018-19, but the budget wrongly factored them in again. Usual accounting practices would be to record the proceeds of a sale only once.
A new platform at Central station built for the Sydney Metro line, which is due to open within months.Credit: Louise Kennerley
This mistake means that the state’s net debt has been incorrectly reported since 2018, and will worsen the government’s already dire financial outlook, which will be outlined when NSW Treasurer Daniel Mookhey hands down his second budget on June 18.
Former premier Dominic Perrottet was treasurer at the time but Mookhey is not pointing the finger at him, rather labelling the costly mistake as an accounting error that went unnoticed for years.
The pre-election budget update projected that NSW’s net debt would be $118 billion in 2025-26 but accounting for the error, the figure should have been $119 billion.
This budget is shaping up to be bleak for NSW after the carve-up of the GST in the federal budget revealed that the state will receive $1.9 billion less next financial year than previously forecast.
The drop in GST payments is greater than estimated by the NSW government, which had been warning the state would be $1.65 billion worse off in 2024-25, the biggest single-year decline in GST for NSW since the tax was introduced in 2000.
The GST is a crucial income source for state governments and will contribute more than 23 per cent of NSW’s revenue this financial year.
Mookhey has warned that the GST carve-up will cost the NSW budget $11.9 billion over four years, meaning the state will almost certainly lose its prized AAA credit rating.
The treasurer said uncovering the major budget mistake was “yet another unwelcome fiscal setback for NSW”.
“This is a material error that has real consequences for the budget,” Mookhey said.
“I’ve written to the auditor-general to notify him about this historical error in the state’s accounts. This adds to the economic headwinds the state budget is facing.”
The serious accounting error was discovered during the government’s property audit, which Premier Chris Minns ordered in May last year in a bid to find vacant blocks of public land that could be used to turn around the state’s flagging supply of new homes.
Minns directed all his ministers to ask their departments to audit their landholdings and identify surplus or under-utilised land parcels for rezoning.
Mookhey has told Auditor-General Bola Oyetunji that “we take these historical errors seriously”.
In his letter to Oyetunji, Mookhey said that the budget position for the Sydney Metro City and Southwest (CSW) project “has duplicated the recognition of asset sale proceeds for Integrated Station Development sites”.
The $21.6 billion Metro City and Southwest line under the harbour and CBD is due to open within months, and will be the second stage of the city’s expanding driverless train network.
Mookhey told Oyetunji that he was confident no other similar mistakes existed.
“Sydney Metro has confirmed this is the only Metro project that is net funded with proceeds of sale, so is not expected to have a replicated approach elsewhere in the Sydney Metro,” Mookhey wrote.
“The result of this error is that Sydney Metro’s budgeted proceeds of sale were overstated, and the government’s budgeted net debt has been understated in budget publications since 2018-19.”
Mookhey said that while “the accounting treatment applied to Metro’s budget estimates would have been signed off by Transport for NSW and Sydney Metro at the time, the assurance processes undertaken by Treasury at the time are unclear”.
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