NSW Treasurer Dominic Perrottet: 'I don't think it's fair that my generation is going to foot the bill'

At 34, Perrottet is not the youngest member of the cabinet but he is certainly in one of the best positions to address the question of intergenerational equity.

"I sit there and think as somebody who is 34, I don't think it's fair that my generation is going to foot the bill for modern day governments that don't live within their means," he tells Fairfax Media.

It's a theme he returns to frequently during his first interview since being promoted to the Treasury portfolio from Finance in new Premier Gladys Berejiklian's first cabinet.

It informs Perrottet's approach to issues ranging from government spending to the current hot topic of housing affordability, which Berejiklian has made one of her three priorities as Premier.

"If you look at governments around the world and the pressures on their economies you're having discussions on a whole range of issues about where we put funding that I think just won't be available," Perrottet says.

"With an ageing population those pressures and the costs of those decisions are going to be borne by our generation. We've got to make the tough decisions now to make sure we have a strong position for the budget going forward."

Formerly a lawyer specialising in banking restructuring and insolvency law with the firm Henry Davis York, Perrottet's political career has enjoyed a rocket ride since he was elected to Parliament as the member for Castle Hill in 2011 (he has since shifted to the seat of Hawkesbury).

Three years later then-premier Mike Baird promoted him to cabinet as finance minister. Then, following Baird's retirement, Berejiklian approached Perrottet to be her running mate to take the top job.

As a leader of the NSW Liberal party's conservative hard-right faction, the choice helped ensure the necessary party room votes swung behind Berejiklian, who is aligned with the left. The deal also delivered him the deputy Liberal leadership. As such Perrottet got to choose his next portfolio. He grabbed Treasury.

Less than six months before delivering his first budget, Perrottet is already signalling he wants to move quickly.

"You don't get into politics to stay still," he says. "You get into politics to reform. And that's what I will do."

Housing affordability

Housing affordability is a core focus for Perrottet. Photo: Peter Rae

Berejiklian's elevation of the vexed housing affordability issue as one of her government's priorities has ensured it is also a core focus for Perrottet.

As finance minister Perrottet last year raised some eyebrows by advocating for the hated stamp duty on residential property sales to be replaced by a broad-based land tax as one part of the solution.

But the proposal was quickly rejected by Berejiklian, then treasurer, who repeated her line that increasing supply was the best approach for the state government to take.

Another outbreak of progressive thinking followed when then planning minister Rob Stokes called on the federal government to wind back negative gearing. Berejiklian has also rejected this in favour of the supply argument. Perrottet aligns himself with Berejiklian's thinking.

"Clearly there is no silver bullet to resolving housing affordability," he says. "There are levers available to us in NSW. From all the research that I've read the biggest lever available at a state level is supply."

Perrottet labels housing affordability "one of the biggest issues of the times".

"As someone who's 34, our generation want to reach the great Australian dream of owning their first home," he says. "As a government we need to look at the levers that are available to us to assist."

On precisely what those levers will be – and if they will be pulled in his first budget, expected in about mid-June – Perrottet remains coy.

Privatisation

It would be a mistake to assume privatisation is now on the backburner in NSW. Photo: Luis Ascui

Privatising state-owned assets and "recycling" the capital raised to fund new infrastructure became a signature policy of the Baird government. The biggest example of this strategy, the partial privatisation of the NSW electricity distribution network to pay for a major building program, ranks among the state's biggest reforms.

The final phase got under way in December when the government called for expressions of interest for the long-term lease of 50.4 per cent of Endeavour Energy, the state-owned electricity distributor servicing much of Western Sydney, the Illawarra and south coast.

But it would be a mistake to assume privatisation is now on the backburner in NSW.

As finance minister Perrottet oversaw the "recycling" of $1.3 billion worth of government property with another $900 million to come.

When asked if the door is open for more of the same in this term of government Perrottet's response is unequivocal: "Absolutely. If there is case that will provide better services for the people of NSW, yes." Although he was quick to add there are "no plans" in addition to proposals which have already been announced.

Perrottet claims it is "completely incorrect" to assume the government is ideologically wedded to privatisation.

"There are numerous decisions where we have not gone down that path," he says.

The new Treasurer is also keen to explore "new models" for delivering the state's social services which may include the private sector. He describes his approach as having a "social heart and commercial mind".

Tax reform and the GST

Perrottet is highly critical of stamp duty, which economists agree is a highly inefficient tax. Photo: Rob Homer

The Coalition's performance on tax reform contrasts with its sweeping asset recycling policies. Changes to the NSW taxation system have been relatively modest since the government took office six years ago.

But Perrottet signalled a willingness to change that. "I am very open to pursuing tax reform in NSW," he says.

Perrottet is highly critical of stamp duty, which economists agree is a highly inefficient tax. But he says governments have not yet made the case for a more efficient broad-based land tax to replace stamp duty.

"If you are going to embark on substantial tax reform you have to bring people with you," he says.

The government has no plans for a broad-based land tax, he adds.

A potential tax reform agenda was outlined in an audit of the state's finances conducted by former Treasury secretary Michael Lambert when the Coalition government won office in 2011. Among the recommendations was the transition to an annual Stamp Duty Replacement Tax, levied on the value of all land, regardless of how it is used or who owns it. The annual benefit from this reform would be worth more than $2 billion a year, the report said.

The GST is always a focus for state treasurers because it is the biggest single source of their revenue. So what does the new Treasurer think about recent proposals to change the consumption tax?

Perrottet pauses to think when asked if he supports Baird's 2015 call for a 50 per cent increase in the GST to help plug the looming gap in state health funding.

"I would not be in favour of increasing tax," he says. "I'd be more in favour of a tax swap than a tax increase."

Making his mark

As treasurer, Baird also made reining in expenses one of the priorities of his tenure. He took a hard line approach to aligning public servant wage growth to government revenue by capping pay increases to 2.5 per cent. His successors in the job, Andrew Constance and Berejiklian stuck with the policy.

Perrottet says he will "continue the strong financial management that Mike, Andrew and Gladys have taken over the six years."

"If you look at what has been the hallmark of success of this government, it's been the financial management," he says. "The reality is you can't make the investments you need to make in health, education and infrastructure if you haven't got the basics right."

He nominates two other focuses: the aforementioned intergenerational equity, and service delivery.

"One of the things I've been passionate about in terms of reform in my role as finance minister has been to move governments into the modern world," he says. "For too long governments have focused on delivering services around what's convenient for them, not what's convenient for the citizens they represent."

He highlights the government's move to centralise services in strategically located Service NSW centres across the state as an example of delivering "a better service for a better price for taxpayers".

"Whether that's in healthcare, education or infrastructure, these are areas across the board that we need to have a greater focus on," he says.

"My generation won't cop service models that are out of sync and built around governments, not around people."