27/09/2019 - 15:20

Revenue tide lifts budget

27/09/2019 - 15:20

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A $2.4 billion surge in revenue above forecast levels helped the state government record a $1.3 billion operating surplus in the year to June, but the overall cash position of the budget is still in a deficit of $924 million.

Revenue tide lifts budget
A big increase in mining royalties was pivotal to the surplus result.

A $2.4 billion surge in revenue above forecast levels helped the state government record a $1.3 billion operating surplus in the year to June, but the overall cash position of the budget is still in a deficit of $924 million.

The inconsistency is because the state government traditionally reports its finances on an operating basis, which includes recurrent spending and revenue.

That compares to the federal government’s approach of reporting an overall cash balance, which includes capital spending.

It is the cash position that determines whether the state’s debt is increasing or decreasing.

The government’s annual report on state finances, released today, showed revenue had come in at $32 billion for the 2019 financial year, compared to $29.6 billion predicted when the budget was first released in May last year.

Revenue had been revised upwards at the mid-year review and in the latest update in May this year.

Royalty income was the biggest help, nearly $1.7 billion above budget at $6.7 billion.

Iron ore dominated and was driven by three factors.

The iron ore price was 30 per cent higher than budgeted, the exchange rate with the US was lower, and the government secured a $250 million royalty backpayment from BHP.

On the other side of the ledger, the government spent $211 million more than budgeted, at $30.7 billion.

Analysing the performance depends on the exact position used for comparison.

For example, Treasurer Ben Wyatt said spending for the 2019 financial year had been $316 million less than anticipated four months ago, the most recent update.

The biggest gap was in education, where spending was $115 million below forecast.

Looking at the budget in cash terms, capital spending was about $5 billion, $1.3 billion below what was estimated when the budget was first released.

Because the government was in a cash deficit position, net debt increased to its highest level on record, at $35.5 billion, but was still $3.6 billion lower than what was forecast when the budget was released.

Reaction

Mr Wyatt said the government’s plan was working.

"We continue to turn the finances around and fix the mess left by the previous Liberal National Government,” he said.

"Achieving the surplus in 2018-19, two years earlier than we expected in our first budget, is very welcome news for every Western Australian.

"As a result of the McGowan government's financial management, taxpayers of WA have seen electricity price increases kept to the lowest level in 13 years, schools and hospitals have received a $281 million job creating maintenance boost all while WA is the only state in the country with decreasing debt.

"Net debt is $4.5 billion lower than forecast under the Liberals and Nationals and WA is the only State where debt will decline over the next four years.

"We continue to focus on managing expenditure growth as this can be controlled by the government, and to provide a buffer against volatile sources of revenue.

"Our controls on expenditure growth continue to lead the state's finances from the wilderness they were left in. 

“Over the first two years of the previous Liberal-National government expenditure growth was an eye-watering 26 per cent, in stark contrast to the 4.4 per cent this government has achieved over the same period.

“Our strong fiscal resolve has been recognised by the credit ratings agencies, with the first upgrade to the state's credit rating in 2018-19 since the former government lost the state's AAA credit rating."

Shadow Treasurer Dean Nalder welcomed the surplus but warned the economy was still weak.

"We've seen a return to surplus courtesy of iron ore prices and the GST fix from the Morrison government," Mr Nalder said.

"What is not so good is whats happening in the domestic economy.

"The domestic exconomy has contracted further.

'We've seen that business investment has shrunk and the household sector has shrunk.

"We're seeing 140,000 households under mortgage stresss, we're seeing record levels of utility disconnections ... there's still hard times out there for West Australians."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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