09/05/2014 - 10:30

Asset sales could generate billions

09/05/2014 - 10:30


Upgrade your subscription to use this feature.

Treasurer Mike Nahan says the government could generate proceeds of up to $3 billion through the sale of several assets earmarked in the budget as candidates for privatisation.

Treasurer Mike Nahan says the government could generate proceeds of up to $3 billion through the sale of several assets earmarked in the budget as candidates for privatisation.

Speaking at a business function in Perth this morning after yesterday delivering his first budget, Dr Nahan defended the government's careful approach to managing asset sales amid growing debt.

The budget identified several potential sales targets, including the Utah Point multi-user export port in Port Hedland, the Kwinana Bulk Terminal, betting agency TAB, and Perth Market Authority, as well as several hospital sites.

However the government looks increasingly unlikely to book proceeds from asset sales in the near term, with Dr Nahan providing no specific timetable for major privatisations.

"We're going about it cautiously - there's no fire sale," Dr Nahan said today.

"These are complicated arrangements and we have not built any of this into the budget yet.

"Until you go to the market and you get the money in hand, you don't put it in the bank for offsetting your debt."

The treasurer also declined to put a date on when the government expects to start paying down its debt, which is forecast to climb to just less than $30 billion over the next four years.

Dr Nahan said he expected debt to peak in the coming years as construction drew to a close on a number of major infrastructure projects

"We will reach a plateau because building will slow," he said.

"We have to increase our surplus levels going forward, in large part because of uncertainty over our revenue stream; but we will also have a modest program of asset sales that will curtail the growth."

The state's royalty revenue intake has grown over the past decade to represent the largest proportion of total government revenue, with Commonwealth grants revenue declining during the same period.

This means the budget is increasingly exposed to shifts in commodity prices and the exchange rate, which could easily erode the modest surpluses forecast over the forward years.

The government's apparent reluctance to address its high levels of spending and growing debt to revenue position drove agency Standard & Poor's to downgrade the state's prized AAA credit rating last year.

S&P yesterday said this year's budget was broadly in line with its expectations and did not change its assessment.

It warned that the budget remained susceptible to external shocks and said the forecast operating margin of less than 5 per cent of revenue provided little buffer against volatile royalty revenue.

"Today's budget is consistent with the state government's mid-year budget update announcement that it will complete fewer debt-funded infrastructure projects," the agency said.

"Consequently, we expect its tax-supported debt as a percentage of adjusted operating revenues to stabilise and remain under 85 per cent over the forward estimates. The outcome of any asset sales on the state's credit quality is dependent on how the government uses the proceeds. 

"The absence of specific measures to address long-term structural issues means general government operating expenditure growth over the forward estimates will generally exceed revenue growth at least until fiscal 2018."


Subscription Options