The centrepiece of the state government’s 2007 budget, handed down last week, was a $433 million tax relief package targeted at first-home buyers, property owners and motor vehicle buyers.
The centrepiece of the state government’s 2007 budget, handed down last week, was a $433 million tax relief package targeted at first-home buyers, property owners and motor vehicle buyers.
Continued strong economic growth meant the tax cuts will largely be covered by further growth in payroll tax collections and mining royalties.
Another notable feature of the budget was the decision to suspend or defer capital works projects worth $565 million due to the state’s overheated construction market.
Treasurer Eric Ripper projected continued large surpluses, with the main threat coming from an expected decline in Commonwealth grants.
The estimated 2006-07 surplus was a record $1.85 billion, up slightly from the mid-year review forecast released late last year, while the 2007-08 surplus was expected to be $1.45 billion.
The expected increase in government spending was expected to be slower in future years, after the government copped a lot of flak for runaway spending growth in recent years.
Spending was projected to rise by 4.6 per cent in 2007-08 after rising by 10.6 per cent in 2006-07.
The budget won little praise from the business community, with Chamber of Commerce and Industry WA chief executive John Langoulant accusing the government of complacency.
Mr Langoulant said there was: “no tax relief to speak of, no attempt to rein in runaway general spending and no evidence of an appetite for tackling the state’s deteriorating tax competitiveness”.
The most expensive tax measure was an increase in the land tax exemption threshold to $250,000, up from $100,000 previously.
A second major initiative means that first-home buyers purchasing a property for up to $500,000 would be exempt from stamp duty. This was double the previous exemption.
The government said this was the most generous exemption for first-home buyers out of any state.
The impact of the tax cuts will be largely offset by a 13 per cent jump in mining royalties to $2.5 billion, and an 8 per cent increase in payroll tax collections to $1.7 billion.
Mr Ripper said the government would not be making any changes to payroll tax rates.
Meanwhile, the deferral of capital works projects reflects the big increase in costs and the acute labour shortages in Western Australia’s overheated construction sector.
After adjusting for the deferred projects, the government will still spend a record $5.8 billion on capital works next financial year.
The government has suspended the $255 million Northbridge Link project and the $24 million upgrade of Members Equity stadium.
Treasurer Eric Ripper said the government has not made any decisions, nor provided any funding, for a major new sporting stadium.
The government has also deferred spending on a wide range of other projects for six to 12 months.
These include the Lancelin to Cervantes Road (saving $45 million in 2007-08), the Department of Agriculture headquarters ($45 million), the Integrated Agriculture Institute ($23 million), the Perth Police Complex in Northbridge ($18 million), the Riverside redevelopment project in East Perth ($9 million) and stage 3 of Challenger TAFE in Fremantle ($6.5 million).
The government had also budgeted to spend $108 million upgrading port infrastructure to accommodate the expansion of Rio Tinto’s HIsmelt project.
It has deferred this spending since Rio has not committed to the expansion.