The state government has postponed some of its big transport infrastructure projects in order to reduce the projected increase in state debt, as it strives to regain its AAA credit rating.
The state government has postponed some of its big transport infrastructure projects in order to reduce the projected increase in state debt, as it strives to regain its AAA credit rating.
The government has also reported an increased operating surplus in the current financial year of $437 million helped by a rapid boost in revenue.
Projected revenue growth for the current financial year is expected to be 9.9 per cent, a 1 per cent rise compared to the August budget estimate of 8.9 per cent.
“At a time when excessive growth in spending has been recognised as a key risk to the State’s finances, the mid-year review shows that the unsustainable growth in Government spending has continued,” CCI Chief Economist John Nicolaou said.
Expenditure estimates have also gone up and are now expected to grow by 9.3 per cent this financial year, up from the 8.4 per cent forecast announced three months earlier in the budget.
“While the Government has announced some important measures to address these challenges, including through its expanded Fiscal Action Plan, these will not deliver the scale of reform needed to bring the budget back under control,” Mr Nicolaou said.
A $1.5 billion public net debt saving has been announced by the government, in a reduction of debt and borrowing with the restructuring of its asset investment program as well as dealing blows to transport infrastructure projects and expenditure on government programs.
Asset sales of the Port Hedland Utah Point bulk Bulk Terminal, closure of the East Fremantle Kaleeya Hospital and the Kwinana Bulk Terminal will also go ahead.
“Reducing gross borrowings by $2.2 billion from $50.2 billion to around $48 billion will put the brakes on state debt which is a key component to returning to our AAA credit rating,” said state treasurer Troy Buswell.
There will be a 10 per cent reduction in government spending for the rest of this year, with the exception of the WA Police, a cap on local government road funding in government, a three-year delay to the MAX Light Rail project while plans for the Forrestfield Airport Link will go ahead and $995 million in cuts to the Housing Authority, Water Corporation and Main Roads programs in an attempt by the state government to reduce net debt from $28.3 billion to $26.9 billion.
Speaking on the transport projects at the mid-year budget review, treasurer Troy Buswell said that they had to choose one or the other to go ahead to avoid further debt.
“At the end of the day they are both important pieces of public transport, however a rail link to Forrestfield will provide transport to unlocking the potential of the region,” Mr Buswell said.
“We are not walking away from the MAX Light Rail project and the benefits it will deliver.
“Ultimately we had to choose one of these projects to go ahead; the MAX Light Rail project is still an effective solution for the northern corridor and still will be.” Mr Buswell said.
The government has also removed a planned expenditure of $104 million for the Kwinana Bulk Jetty terminal, while voluntary redundancies have added to the savings total with the government spending $132 million on over 1,000 public redundancy packages for long term benefit.
In the health sector, full capacity operation of Fiona Stanley Hospital will be delayed until mid-2014, with another $52.7 million in costs associated with facility maintenance including payments to support services company Serco.
The $2.2 billion building was originally planned to be operating in April 2014 but will now be slowly be ramped up to full capacity by mid-2015.
The government will maintain an infrastructure spend of $24.4 billion over the forward estimates on projects such as Perth Children’s Hospital; Elizabeth Quay foreshore development; a new WA Museum and the Burswood stadium.
In August, the budget estimate for 2013-14 is up $51 million on last year, while iron ore price estimates have risen $4.20 from $116.70 per tonne to $120.9 per tonne.
