Newly-appointed State Treasurer Christian Porter today announced a small downward revision in Western Australia's economic growth rate and a large upward revision in the expected budget surplus, but warned WA that the good times would not last forever.
A large increase in mining royalties means the 2010-11 budget surplus is projected to be $758 million, up from a May estimate of $286 million.
That will be followed by $1 billion surpluses in the next two years, before declining sharply in 2013-14 on the back of lower GST grants and predicted falls in commodity prices..
Mr Porter also announced that WA's economic growth rate this year has been revised down to 4.0 per cent (from 4.5 per cent previously) because of reduced household spending and the effects of the drought.
"Things are strong and stable, but unrealistic expectations should not be created," Mr Porter told the assembled media.
Mr Porter warned not to expect "rivers of gold" as a return to more normal commodity prices and a continued fall in GST revenue would impact the surplus, predicted to fall to just $147 million by the 2013/14 financial year.
Returning to a theme frequently touched upon by the Premier, the Treasurer said the low returns WA received from its GST revenue made it almost feel not worth investing in the state's growth,
He noted that the expected $1.5 billion over the next four years negotiated in new royalty deals by the Premier would almost be negated over the same period by $1.1 billion flowing out of the state in GST revenue.
"The GST was meant to be a growth tax for the states, it has turned out to be a growth tax for some states, but unfortunately it's those states that are less productive across the board," Mr Porter said.
"For those states like Western Australia that are producing more and selling more and negotiating to bring more money into the state coffers, it is turning out to be a shrinkng tax."
Mr Porter noted that expenditure growth had increased from the predicted 3.9 per cent to 6.6 per cent, but highlighted that that was an area he was keeping a close eye on.
"In my view as the incoming Treasurer, expenses growth is now under control," Mr Porter said.
"In the previous budget, which this government was involved in, expenses growth was running at 12 and a half per cent."
Areas of increased spending cited by Mr Porter were health and education, including new enterprise bargaining agreements that had been signed by health care professionals and the construction of the new children's hospital.
Net debt has been revised down slightly from $15.4 million to $14 million, but is still expected to hit almost $20 million by mid-2014.
Mr Porter called the state's debt significant but manageable, and said it was something he had kept a close eye on even before he was appointed Treasurer, and reaffirmed his commitment to keeping debt under control.
The Chamber of Commerce and Industry WA said the review showed a number of issues still needed to be addressed to help the budget bottom line.
CCIWA chief economist John Nicolaou said the Government was relying on the business community through high taxes to ensure the budget remained in surplus.
"With the budget expected to remain in surplus over the next three years, the Government can no longer ignore the need for meaningful tax reform, starting with payroll tax," he said.
Mr Porter did highlight tax reform as an area he was interested in investigating further, as well as finding a better cost structure for electricity and water pricing.
The Chamber of Minerals and Energy of Western Australia (CME) has used the review to restate its position on the federal government's proposed mining tax, saying that future royalty increases should be credited against the tax on profits to stop revenue flowing interstate.
Chief Executive Reg Howard-Smith said anything less would result in a double-tax whammy for WA mining companies, undermining international competiveness.
"The existing state regime ensures all money derived from WA projects is actually spent in WA," he said.
"Policies such as Royalties for Regions are seeing hundreds of millions of dollars pumped back into the regional communities, from where these minerals are extracted."
