Ben Wyatt has been treasurer since 2017.

GST fix helps state into surplus

Federal infrastructure grants and reform of the GST have helped the state government project a $1.5 billion operating surplus in the upcoming financial year, although funding for the Ellenbrook rail line is largely absent.

But the state’s debt mountain will continue to increase until the end of the 2020 financial year, peaking at $39.5 billion in net terms.

That's because the budget won't be in a cash surplus, a measure that accounts for infrastructure spending, until the 2021 financial year.

A unique quirk of the state government’s accounting methodology is that infrastructure grants count towards an operating surplus, but the cost of building the projects is only counted under the cash balance figure.

That has been the case for decades.

In cash terms, this budget is in a deficit of $248 million for the 2020 financial year.

The impact of the federal contribution is significant.

Federal grants will be $10.5 billion for the 12 months to June 2020, up 9.6 per cent from the 2019 financial year.

For the 2018 financial year, federal grants had been $7.9 billion, and so the projected figure for the year ahead represents a 33 per cent increase in two years.

Part of the lift this time was via the federal GST floor payment, which will amount to $814 million in the 2020 financial year.

General purpose Commonwealth grants rose $652 million to be nearly $5.3 billion.

Overall, state government revenue grew 4.7 per cent to be $31.3 billion.

“The major source of revenue growth in 2019-20 is Commonwealth grants, primarily reflecting the GST distribution reforms secured by the state government in 2018 and additional road funding reflected in the Commonwealth budget,” the budget papers said.

On the spending side, the budget forecasts growth of 1.5 per cent, to be $29.8 billion.

Those numbers don't include asset investment, which will total $5.6 billion in the 2020 financial year.

About half of that will go to roads and rail.

The Thornlie-Cockburn rail link and Yanchep extension are scheduled to be finished by the 2022 financial year.

Ellenbrook rail line investment is largely absent, however.

Only $142 million is allocated to the project, to redevelop Bayswater station and for early works.

That's despite Infrastructure Australia listing it as a priority iniative.

The state government will submit a preferred alignment for the project in the third quarter of this year.

Shadow Treasurer Dean Nalder said the budget did not include funding for a series of projects.

“This is not a transparent budget and does not include the state’s share of capital funding for major infrastructure promises such as the Ellenbrook rail line, Joondalup Hospital or King Edward Memorial Hospital,” Mr Nalder said.

“Some $3 billion in promised job-creating capital expenditure has been pushed out beyond the forward estimates.

“There are record numbers of WA businesses going to the wall and this budget offers them no relief and no hope."

Pitcher Partners WA managing partner Leon Mok said the budget had returned to operating surplus earlier than originally forecast.

"It is pleasing to see that the government’s spending control has remained disciplined," Mr Mok said.

"While it is important to pursue financial discipline, the question for middle-market businesses and investors is whether government should keep consolidating or also invest to stimulate the economy.

"With the forward estimates showing healthy surpluses even with tempered iron ore price expectations, the government should be doing more to help middle-market and small businesses grow and to encourage investment.

"Items such as payroll tax simplification and a reduction in property taxes will help generate more jobs for Western Australians and bolster investment in the State."

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