28/12/2011 - 00:00

Debt, spending rise as state budget weakens

28/12/2011 - 00:00


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Debt, spending rise as state budget weakens

Weaker-than-expected revenue combined with faster-than-planned spending growth have resulted in the state government’s projected budget surplus being revised down to $209 million.

Announcing the mid-year review, treasurer Christian Porter said the state was on track for “sound financial outcomes” despite serious global instability and impending financial threats from the federal government.

Western Australia is set to record the highest budget surplus of any State in the nation and has a strong and stable economic outlook, Mr Porter said.

The Treasurer said the projected 2011-12 surplus was lower than forecast at Budget time (May 2011), mainly due to weaker projections for royalty revenue and transfer duty, which are now estimated to be down a combined $318 million this financial year.

CCI chief economist John Nicolaou said “the government needs to control unsustainable growth in spending as economic conditions soften”. 

“Businesses are tightening their belts; the Government also needs to do the same.

“Spending growth continues to be too high - 11.6 per cent in 2011-12, up from 7.9 per cent during the budget.

“Instead, the state government is again relying on business to prop up the State’s budget position.

“The figures show payroll tax receipts are expected to be $105 million higher than the budget estimate for 2011-12 - half of the entire predicted surplus of $209 million.

“The government should be looking to help businesses through these difficult times by easing high business costs.

“The upcoming budget is the chance to reign in the Government’s expenditure and deliver on their promise to ease the tax burden on the business community.”

Shadow Treasurer Michelle Roberts said massive increases to state debt and spending and hidden costs were the main outcomes of the mid-year review.

“Despite revenue growing by 30 per cent since the Liberals took office, expenses have grown by 49 per cent,” Mrs Roberts said.

“Despite inheriting a debt of $3.6 billion, debt today sits at $16 billion and it will be $24 billion by 2015.

Mrs Roberts said the review did not include full funding for the Perth Stadium or the Perth Waterfront developments, two of the biggest projects in the state.

Mr Porter said the key contributing factor to WA’s net debt is the need to borrow to build critical infrastructure.

“The Government continues to fight for a fairer share of GST revenue to help fund the State's substantial infrastructure requirements,” his statement said.

However, WA is still forecast to lose $12 billion in GST revenue over the five years to 2014-15 and this is a significant financial barrier to providing strategic infrastructure to benefit both the WA and national economies.

“Recent moves by the Federal Treasurer to request the GST Review Panel examine options to penalise States that increase royalties presents a further potential threat to WA’s finances.”

Mr Porter said the projected levels of borrowing for infrastructure and net debt remained affordable and consistent with the State’s triple-A credit rating.

The treasurer said the higher rate of spending growth largely reflects the impact of the lower than expected expenses in 2010-11, rather than additional expenditure in 2011-12.

“Of critical importance is that growth in the public sector wages bill has stabilised with the estimate being a 7.2 per cent increase in wages growth in 2011-12 compared to an average of 8.8 per cent under the previous Labor government.”

The mid-year review included updates to the state’s economic outlook.

Gross State Product growth has been revised up to 4.75 per cent, the second highest growth in the nation (up from 4.5 per cent at Budget time), and to 4.25 per cent in both 2012-13 and 2013-14 (up from 4 per cent at Budget time).


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