26/09/2018 - 15:17

Budget boost as economy grows, feds give cash

26/09/2018 - 15:17


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Grants from the federal government and delayed dividend payments from state-owned enterprises have helped the state government report an operating deficit 73 per cent below forecast in the 2018 financial year, while the non-trade economy has grown after a sustained period of shrinking.

Budget boost as economy grows, feds give cash
Ben Wyatt credited spending restraint as key to the improved budget position. Photo: Gabriel Oliveira

Grants from the federal government and delayed dividend payments from state-owned enterprises have helped the state government report an operating deficit 73 per cent below forecast in the 2018 financial year, while the non-trade economy has grown after a sustained period of shrinking.

Releasing the state’s audited 2018 financial year results today, Treasurer Ben Wyatt revealed an operating deficit of $618 million, well down on a previous forecast of $2.3 billion.

Net debt was $3.2 billion lower than had been forecast.

That performance was largely underpinned by improved revenue, up 9 per cent in the year to June 2018 to $29.3 billion.

The budget had projected growth of 6.7 per cent.

The big revenue boost was driven by two main factors, comprising higher dividends from public corporations and early receipt of Commonwealth infrastructure payments for projects such as Metronet.

Public corporations, which include Western Power, Synergy and Water Corporation paid dividends of $1.7 billion, compared with $837 million in the previous financial year.

The financial statements said most of that benefit came because dividend payments from the previous financial year had been delayed.

Commonwealth infrastructure payments were a further big win for the state government, with $702 million of grants for infrastructure and about $305 million in higher GST receipts.

The other major revenue sources are taxation and royalties.

Taxation revenue was roughly unchanged from the 2017 financial year, at $8.6 billion, in line with budget forecasts.

Royalty revenue was marginally down on the previous corresponding period, at $5.2 billion, in line with estimates.

All this comes as there is finally clear data showing the state’s economy is in recovery.

State final demand, which measures Western Australia’s economic performance ignoring trade, grew 1.3 per cent in the financial year, which Mr Wyatt said was the first period of annual growth since the 12 months to June 2013.

Business investment, which rose significantly during the early years of the resources boom and then declined precipitously in recent years, was up 0.1 per cent over the year.

That was the first positive performance since 2013, Mr Wyatt said.

On the spending side of the ledger, expense growth was low for the 2018 financial year, at 1.9 per cent.

Mr Wyatt said that was the lowest level in 20 years.

But it is worth noting that in Mike Nahan’s final budget as treasurer, 2016, spending growth for the 2018 financial year was forecast to be -0.1 per cent.

Mr Wyatt said underlying expense growth had been 0.2 per cent, after removing one-off impacts from the voluntary targeted separation scheme and machinery of government changes.

Mr Wyatt touted the state government’s restraint in health as having been key to keeping spending growth down.

“It's not being driven by health cuts but by health efficiencies,” he said.

“More activity can be done within the budget that we set for health … it’s about the activity that you can produce in the budget that you have.”

The state had historically been a high spender on health in a national context, Mr Wyatt said.

“The Western Australian taxpayer is more generous to the health system than any other taxpayer in the nation,” he said.

“There’s no way the WA taxpayer can be critiqued for not being generous to the health system.”

Where there was potentially some risk was in corrective services, Mr Wyatt said, with a potential need for a new prison.


Shadow Treasurer Dean Nalder said it was concerning that much of the revenue upside was from one-off sources.

“With a quarter of a million of Western Australians either unemployed or underemployed and 135,000 WA households experiencing mortgage stress, it is clearly a bit early to be claiming economic recovery,” he said.

“It should also be remembered these latest numbers were achieved at the expense of the jobs of more than 2,300 public servants and on plans to axe another 600 frontline public sector jobs.

“We are already seeing the impact of these cuts on frontline services in education and health and this report tells us there are still 150 police officers, 390 disability service workers and 60 education workers to lose their jobs.

“WA’s one million households are paying an additional $700 million every year to pay for the unfunded and unaffordable election promises Labor made to buy its way into government.”

Chamber of Commerce and Industry of WA chief economist Rick Newnham said the low level of spending growth had been a significant achievement.

“The updated state finances reflect a strong focus on reducing government expenditure and a slowly but surely recovering WA economy working together to improve the books,” he said.

“Employment growth is delivering for both job seekers and WA’s finances, with a $50 million increase in payroll tax revenue, mostly due to an increase in mining activity.

“It is welcome news that almost all of the 3,000 voluntary targeted separations will be achieved, albeit over a longer period of time, which will be the most significant scheme ever run by the WA public sector.

“This has been a major piece of the public-sector reform puzzle for WA.

“External factors have contributed to general government revenue growing by 9 per cent, relative to 2016-17, namely rallying commodity prices, an upgrade to the national pool of GST and growth in business investment and household consumption.

“Much of this revenue may be one-off cash injections, so spending constraint must remain a priority with WA continuing to be the highest spending state government in the country on a per person basis.”


Mr Wyatt said the GST deal was still very important for WA.

He said he was confident that at least part of the federal government’s proposed changes to the distribution formula would be welcomed by other states.

The first portion, effectively a top up to the GST pool, will take priority until 2021, after which changes to the equalisation mechanism will begin to have an impact.

The latter part may meet resistance, although Mr Wyatt was confident.

“The board of treasurers met some weeks ago now,” he said.

“The issue was not the concept of change to horizontal fiscal equalisation, but each treasurer was (asking) how the commitment of ‘'no worse off’ would be met by the Commonwealth.

“(Commonwealth) Treasurer Frydenberg will have to make that case but I think that can be made now.

“Hopefully other state treasurers don't scenario analyse it to the point of obsession and find a reason to oppose (change).

“Certainly the conversations so far have been positive.”


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