21/12/2012 - 13:20

Buswell trims forecast surplus

21/12/2012 - 13:20

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Buswell trims forecast surplus

The state government has trimmed its surplus forecast for the current financial year by $56 million as it lifts spending to meet the needs of an expanding population while revenue from mining royalties softens.

Treasurer Troy Buswell handed down the state's Mid Year Economic Review today, showing an updated expected surplus of $140 million for 2012/13, down from the budget estimate of $196 million.

While net debt is now tipped to be lower than the budget estimate of $18.59 billion at $18.22 billion, it steadily rises in the forward estimates to $24.76 billion in 2015/16 - despite Premier Colin Barnett's previous pledge to cap debt at $20 billion.

Mr Buswell said the higher debt levels were needed to meet the infrastructure and services demands of a growing population, with some 1500 new arrivals in WA each week.

The projected rise in debt did not reflect higher public sector wages, he said.

Revenue growth this financial year is forecast to be at a historically low level for the state at only 0.4 per cent, a dramatic plunge from the budget estimate of 2.9 per cent, reflecting lower mining royalties, which now comprise 21 per cent of all revenue.

The state government's crucial iron ore price per tonne forecast has been revised downwards to US$118.40, compared to US$127.30 in the budget.

It expects the US dollar exchange rate, which was the other major factor hampering revenue, to lift from 99 US cents/$A1 to 103.4 US cents/$A1.

Mr Buswell said the focus would be to keep a tight leash on spending - although the state government has since the budget, increased its infrastructure investment plans for the next four years by $1 billion for projects including the new Perth Stadium as well as $341 million on roads.

The asset investment program now stands at $7.63 billion, steadily reducing to $5.34 billion in 2015/16.

"That to me (reducing spending) is the core issue," Mr Buswell told reporters.

"Admittedly, we've had to borrow significant amounts of money this year, last year and next year in particular to meet our asset investment goal.

"Expense growth management is important and we need to keep focusing on it."

Notably, the state government expects to slip into deficit in 2013/14, which Mr Buswell described as a "modest" $187 million shortfall, saying it was a gap that could easily be closed if some of its projections turned out to be too pessimistic.

Ratings agencies yesterday warned the state was at risk of losing its AAA credit rating due to high debt levels.

Mr Buswell said volatility in commodity prices had become the new norm while the strong Australian dollar looked here to stay.

The state's peak business group said the shrinking surplus highlighted the need for a full review of government programs.

Chamber of Commerce and Industry WA chief economist John Nicolaou said it was pleasing to see the state government meet its spending targets, but efficiency dividends would only go so far.

“The Government is expecting business to pay more than ever before,” ' Mr Nicolaou said in a statement.

“For payroll tax only, the government is expecting to collect $16.6 billion over the forward estimates (60 per cent increase on the previous four year period), as more small businesses are caught out in the tax net.

“The business community will be looking to all sides of politics to not take them for granted.

"The upcoming election will be the opportunity for each side to show what they will do to ease the rising costs of doing business and support the future growth of the business community.”

Opposition spokesperson for Treasury Ben Wyatt savaged the review, saying it could be summarised by record debt, spiralling spending and “Mr Barnett's addiction to pet projects in the Perth CBD”.

Mr Wyatt said a glaring omission from the review was definite costings for the government's light rail plans.

According to the document, a final cost will not be available until planning for the light rail project has been completed.

“This is a damning oversight by Mr Buswell,” Mr Wyatt said.

“It is the height of hypocrisy that Mr Buswell is trying to put costings on WA Labor projects but can’t event cost his own.

“Yet his own document revealed the Treasurer had no idea how much his own government’s light rail system would cost, despite the fact that the Barnett government has already spent millions of taxpayers’ money advertising it.

“Perth is suffering a congestion crisis and the Mid Year Review should have included major funding to expand and improve public transport services in our suburbs.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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