Resources royalty reliance and a lack of action on payroll tax were among the key observations from business groups digesting today’s state budget – the first from Treasurer Rita Saffioti.
Resources royalty reliance and a lack of action on payroll tax were among the key observations from business groups digesting today’s state budget – the first from Treasurer Rita Saffioti.
The budget forecast a surplus of $3.2 billion in the current financial year, with smaller surpluses of $2.6 billion and $2.4 billion forecast in the years ahead.
The surplus, and those expected ahead, will again be built on cornerstone revenue generated by resources royalties.
Mining royalties are expected to land on $11.2 billion in the current financial year, based largely on $9.8 billion generated for the state from its massive iron ore output.
The number is expected to come down in the forward years as a result of the state’s conservative price forecasting mechanism which has, in recent years, resulted in larger than forecast budget surpluses.
The forecast model was revised in today’s budget announcement, from $US66 per tonne to $US71/t.
In its budget response, the Chamber of Minerals and Energy WA highlighted the importance of the state’s resources sector to the overall result.
“The contributions of our members collectively enable the WA and federal governments to provide cost of living relief to WA families, fund our essential infrastructure, deliver frontline services in health, housing and education, and support our communities,” CME WA chief executive Rebecca Tomkinson said.
“That’s all underpinned by factors such as the strong confidence of WA businesses, with resources at the top of that tree.
“There’s an expected 13.25 per cent increase in business investment this year – the highest in more than a decade.
“WA continues to produce almost half the nation’s goods exports, helping to generate almost $260 billion for the nation.”
Ms Tomkinson said while times were good at the moment, it was important that the state and federal government – which will drop its own budget next week – move to support the sector to mitigate geopolitical pressures like those which have impacted the nickel sector.
“This budget comes at a critical time for our state’s resources sector, with rising costs, falling commodity prices and strong global competition testing our industry’s resilience,” she said.
“For our sector’s contribution to jobs, local businesses, communities and government revenues to continue to grow we need the basics from the WA Government: efficient approvals, turnkey strategic industrial areas and a low emission, reliable and cost-competitive energy system.”
The CME highlighted the state’s Strategic Industries Fund, announced this morning ahead of the budget’s official release, as a key investment which would benefit the resources sector.
It also highlighted a $200 million critical minerals advanced processing common user facility, expected to be co-funded by the federal government in next week’s budget and likely to be located at Kwinana, as a key detail.
The Association of Mining and Exploration Companies was also buoyed by the inclusion of the facility, which it said it had proposed to the state back in 2021.
AMEC chief executive Warren Pearce said the facility, of which few details are known, would support the delivery of a downstream minerals processing industry in WA.
“This state-of-the-art facility will assist Western Australia critical mineral developers to finalise their processing and refining methodologies and explore greater value adding opportunities,” he said.
“This will support industry to deliver on a downstream reality for Western Australia and is a substantial investment in realising Western Australia’s critical minerals value-adding ambitions.”
AMEC was joined by the Property Council WA in its praise of the state’s $500 million investment in strategic industrial areas.
Property Council WA interim executive director Emily Young said the $500 million investment for strategic industrial areas acquisition demonstrated a firm understanding of the important role industrial lands play in the state's economic future.
“Supercharging the industrial sector is essential with an estimated 1.3 million square meters of industrial space required by 2026,” she said.
“The budget also included a range of measures to boost WA’s workforce.
“With the state set to grow to over 3 million people by 2025, it is imperative that we have the skilled workforce available to build the homes needed to support our growing community.
“There has never been a better time to take up a trade with the state investing $85 million to expand the capacity of the construction workforce, and with $42.4 billion allocated to the asset investment program over the next four years.”
Ms Young said the property council would work with the state government to deliver initiatives under the $1.1 billion investment allocated for housing and homelessness in the budget.
No payroll relief
The Chamber of Commerce and Industry WA had been steadfast in its calls for payroll tax relief targeting small and medium-sized businesses in the lead up to the budget.
No relief was forthcoming, with payroll tax expected to boost the budget by $5.8 billion.
“This budget is built on a bedrock of iron ore, but for small and family businesses, it’s all glitter and no gold,” CCIWA chief economist Aaron Morey said.
“Just like households, businesses are drowning in rising costs and there is not enough in this budget to address that.
“Fixing WA’s sky-high payroll tax was one way the government could have relieved the pressure on small and family businesses, and it is regrettable they have missed the opportunity to do so.
“The government expects to reap $5.8 billion next financial year from payroll tax, increasing to an eye-watering $6.7 billion by 2028.”
The continuation of the state’s $400 electricity bill subsidy was welcomed, as were boosts to trade apprenticeships and moves to cut green tape.
Housing pressures pile up
Housing was outlined at the outset as one of the budget’s five priority pillars, and the state delivered $1.1 billion worth of investment in housing and homelessness initiatives – including increases to stamp duty release thresholds for first homebuyers.
The state saw record migration growth last year, combined with record low unemployment and rental availability requiring an acceleration in housing options.
Urban Development Institute of Australia WA chief executive Tanya Steinbeck warned a record $42.4 billion infrastructure spend commitment over the coming four years would place additional pressure on the residential construction sector.
“UDIA WA is forecasting a 30,000 shortfall in housing supply over the next five years. With significant increases expected in house prices due to dwindling stock levels, housing affordability and availability will get worse before it gets better,” she said.
“The private sector delivers 96% of housing supply in Western Australia and with construction cost pressures in apartments making affordable, high density difficult to deliver – we need to ensure that we address blockages in the supply pipeline that are preventing developers from delivering more homes, faster.”
UDIA WA called for further funding for key pieces of “catalyst infrastructure”, such as power, water and sewage, to accelerate progress in development areas.
The Housing Industry Association joined UDIA in welcoming incentives to support apprentices and the construction workforce, as pressure mounts on the industry.
WA executive director Michael McGowan said housing and cost of living challenges were the biggest issues for state and federal governments.
“HIA has strongly advocated that tackling the state’s housing challenges is not as simple as stimulating demand,” he said.
“The demand is there, so investment has to be focused on bolstering the workforce to deliver housing and creating a stable future pipeline for the home building industry.
“The investment of $840 million in social and affordable housing and services; $85 million in supporting new workers into the industry and the employers that invest in those workers; stamp duty concessions that are more appropriate for the market; and $5 million to incentivise vacant homes back into the market, are all positive and responsible ways to address the housing challenges over the next 12 months.”
Mr McGowan said 8,000 homes needed to be built to meet the housing targets set by the federal government.
“We can’t get there in a year, hence a pragmatic approach is needed to build the capacity of the industry,” he said.
“This budget invests in the future workforce, the future pipeline of social and affordable housing, and incentivises existing housing stock back into the market, while at the same time increasing the support services for those doing it tough until such time that we can deliver more affordable homes.
“There has been a strong focus in this budget on supporting the industry to build a workforce that can sustainably deliver more homes for Western Australia and that’s all that we asked for.”
Master Builders WA chief executive Matthew Pollock said the budget tackled the big issues, taking a swipe at Victoria’s state budget released earlier this week in the process.
Mr Pollock said spending to support housing, diversification and decarbonisation, while delivering cost of living support, meant WA’s budget left the rest of the nation in the dust.
“Thanks to several years of good economic management, the WA economy is showing the rest of the country a clean set of heels,” he said.
Mr Pollock said the challenge for WA would be making sure capacity and supply keep pace with the demands placed on the sector to deliver housing needs.
The housing investment was also welcomed by Real Estate Institute of Western Australia, particularly the increased thresholds for the first home owners transfer duty concession.
“While there is no silver bullet to addressing the challenges WA’s housing market faces, we welcome the fact the government has opted for incentives to boost housing supply, rather than punitive measures such as new taxes as we’ve seen in other states,” REIWA chief executive Cath Hart said.
“The fundamentals of the WA economy remain strong with the Treasurer today forecasting the state is on track to reach 3 million people next financial year – this will drive ongoing demand for housing and see house prices continue to climb.
“We’re particularly pleased to see changes to the property price thresholds for first home buyer stamp duty exemptions to better reflect the current market conditions which was a proposal in REIWA’s budget submission.”
Ms Hart said WA’s strong property price growth in recent years meant first home buyers had to pay more.
“This is the first time the thresholds have been amended since July 2014 and the median house price in Perth is now around $630,000 so lifting the thresholds will be a welcome change to support first home buyers in WA,” she said.
Tourism funding welcomed
The Tourism Council WA welcomed a record $201 million spend designed to stimulate the sector in the years ahead.
That included $25 million across four years for additional major events – building on visits from Coldplay, the WWE and the UFC.
Tourism Council chief executive Evan Hall said the state’s investment in Coldplay and the WWE alone had generated $103 million in visitor expenditure alone.
“With world-class event facilities in Optus Stadium and RAC Arena, the additional $25 million for major events will be critical to grow tourism and jobs in WA,” Mr Hall said.
“We need to remain absolutely focused on those key major events that bring in tens of thousands of international and interstate visitors to WA and the thousands of jobs their spending creates.
“Bidding for events is highly competitive between States - this funding will enable WA to secure big, Australian exclusives and to become a dominant event destination in South East Asia.”
The Australian Hotels Association also welcomed the boost in funding for major events, along with $4.9 million for the Tourism Workforce Development Program designed to support the industry's workforce.
“This new funding will play a significant role in boosting the reputation of WA as an events destination, bringing new visitors to the state and driving economic growth for our hotel and hospitality industry,” AHA WA chief executive Bradley Woods said of the major projects fund.
“This is a welcome development for the industry and the broader community, and we look forward to seeing visitor numbers increase along with new opportunities to showcase our world-class hospitality venues and to promote WA beyond our borders.”
Overall analysis
The Committee for Economic Development of Australia was complementary of the state's budget position, but sounded a warning around the state's growing debt position despite the surpluses coming in.
CEDA chief economist Cassandra Winzar warned that a large cost of living package and record infrastructure spend could add to inflation, and labelled forecast public sector debt - which will increase from $28 billion to $40.9 billion across the forward estimates - "disappointing".
"This is disappointing, as reducing government debt is an important part of reducing the state’s financial risk and strengthening its long-term economic growth prospects," she said.
Ms Winzar said the state needed to focus on economic diversification to secure a prosperous future ongoing.
"Continued effort is needed in opening WA up to new markets and providing foundational support to growth industries such as new energy technologies and developing advanced manufacturing capacity," she said.
"The strategic industries fund is a good starting point but supported projects must have clear objectives and include measures to simplify planning and approvals processes across governments."
"An attractive business environment is critical to encourage investment in diverse products, industries and export markets."
More budget coverage:
- Surpluses to continue but debt increases
- Critical minerals weigh, iron ore assumption hiked
- Govt to spend $2.7bn on Metronet
- Business investment hits a record
- Record spend highlights next infrastructure wave
- Duty threshold up to aid first home buyers
