19/05/2011 - 14:53

Debt to soar but its not real: Porter

19/05/2011 - 14:53

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The state government's annual budget has projected a blow-out in state debt to more than $22 billion over the next four years but is based on revenue estimates that treasurer Christian Porter admits are not realistic.

Debt to soar but its not real: Porter


The state government's annual budget has projected a blow-out in state debt to more than $22 billion over the next four years but is based on revenue estimates that treasurer Christian Porter admits are not realistic.

The budget shows the state government will keep its "net operating balance" in surplus over the next four years, starting with $784 million in 2010-11 and $442 million in 2011-12.

However an increase in government borrowing to fund its capital works program will lead to state debt rising from $13.4 billion in the current financial year to $22.4 billion in 2014-15.

A key estimate underlying the projections is that WA's GST relativity will fall progressively from 68 per cent this financial year to 33 per cent by 2014-15; i.e. WA will get back just 33 cents for every dollar of GST collected in the state.

"It is certainly a worst-case scenario, I don't expect it will happen," Mr Porter told a media briefing today.

Asked why the government and its treasury advisers did not adopt a "likely" scenario, he said "we tried to do what was best practice, fair and proper".

Mr Porter said "there is no bigger issue" than improving the distribution of GST revenue, which is the subject of a major national review.

He said the current system is "heading towards a train wreck", and if WA's share did fall to 33 per cent "that would be very difficult for the state to cope with".

The treasurer told the media briefing the theme of this year's budget was significantly different from the Liberal National government's last two, and was in two halves: supporting the community and investing in infrastructure to build the state.

Government spending is expected to rise by 7.9 per cent in 2011-12, which Mr Porter acknowledged was above the government's own target of 6.5 per cent.

The major spending initiative was a substantial increase in funding for not-for-profit organisations.

Revenue is projected to grow by 6.2 per cent in 2011-12, with the main drivers being a 15.3 per cent lift in royalty income and, ironically, a 14.3 per cent lift in GST grants.

The major revenue measure announced in the budget was a gradual increase in royalties applying to iron ore 'fines'. This is expected to raise $1.9 billion over the next four years and has immediately created friction with the federal government (see separate article).

The state government has also announced rises in electricity tariffs (up five per cent per year for the next two years and 12 per cent per year in the two years after that) and water charges (up 8.5 per cent).

Another feature of the budget was in an increase in the government's capital works program to a record $7.6 billion in 2011-12 (see separate article).

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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