16/12/2021 - 16:13

Strong economy boosts WA budget

16/12/2021 - 16:13

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Higher public sector wages, new transport projects and Burrup Peninsula infrastructure are among $2.2 billion of state government spending announced as rising tax revenue fills treasury coffers.

Strong economy boosts WA budget
Mark McGowan earlier this year. Photo: Matt Jelonek

Higher public sector wages, new transport projects and Burrup Peninsula infrastructure are among $2.2 billion of state government spending announced as rising tax revenue fills treasury coffers.

While the rapid drop in iron ore prices has dominated headlines in recent months, growing receipts from payroll tax and stamp duty have more than offset the impact on royalties.

The state’s mid-year budget review showed stamp duty revenue would be $1 billion higher over the next four years than the government predicted in its October budget.

Payroll tax collections will be $622 million higher, with job growth forecast to be nearly 3.8 per cent this financial year.

Commonwealth grants were up by $1.8 billion, thanks largely to transport funding and income through the North West Shelf Venture.

By contrast, royalty income will be $783 million lower than expected for the forecast period out to June 2025.

The economy is predicted to grow strongly.

State final demand will rise 5 per cent in the 12 months to June, despite plans for the state’s borders to reopen in February.

All of that means the government has a stronger revenue stream ahead than it had expected in October.

That has helped finance a range of new initiatives.

A more generous wages policy for public sector workers will cost $560 million over the four years forecast, on top of $631 million promised only a few months ago.

Unions will be able to pick one of two wage agreements under the policy.

A worker will either be given a 2.5 per cent annual wage increase with a $1,000 sign-on bonus; or a 2.5 per cent increase with an additional 0.25 per cent annually hinging on reforms.

"Our public sector workers, including nurses, teachers, police and public servants have worked hard to make Western Australia the safest place to live - with one of the strongest economies in the world - throughout the COVID-19 pandemic,” Premier Mark McGowan said.

Mr McGowan said the state’s strong financial performance had supported the new policy, which he said would be sustainable.

The government said spending on health had been increased by $1.3 billion since the October budget, with other measures such as the $186 million Reconnect WA campaign already announced.

About $1.2 billion extra will be spent on a series of transport projects, including the Byford rail line and Inner Armadale line level crossing removals, with both to include elevated lines.

The state also promised $300 million for a common user infrastructure facility on the Burrup Peninsula, with hopes it would be backed by a $214 million Northern Australia Infrastructure Facility loan.

The facility will be contingent on a final investment decision for the Perdaman urea project on the Burrup.

Perdaman’s $4.5 billion Karratha urea plant will use gas from Woodside Petroleum’s Scarborough and Pluto Train 2 development, which was confirmed in recent weeks.

A timeframe for a final investment decision on the Perdaman plant is not yet finalised, but Business News has previously reported it was likely to follow in the months after a Scarborough FID decision.

Overall, the state’s operating surplus for the 2022 financial year will come in $400 million lower than previously predicted, at $2.4 billion.

Mr McGowan said the state’s finances were the strongest in the country, with surpluses throughout the forward estimates and the lowest debt trajectory of all states.

"The mid‑year review uses our financial capacity to make further investments as we prepare to transition border restrictions when we reach our 90 per cent vaccination rate in early 2022,” he said.

"These investments ensure that we are in the best possible position to have a soft landing as we begin living with COVID-19 in the community, to reconnect successfully with the world, and to continue to diversify and strengthen our economy.”

Reform call

Shadow Treasurer Steve Thomas said the state government had squandered an opportunity to reform the state’s economy.

“This government is looking at $16 billion worth of surpluses over five years in an unprecedented flow of incoming cash,” he said.

“The McGowan government should be thanking the current iron ore boom and the new GST deal introduced by the federal Coalition government.

“To suggest that their financial management has been responsible for this outcome is a ridiculous sleight of hand that should not be allowed to go unchallenged.”

He said now was the right time to reform taxes such as payroll tax.

“The boom-and-bust cycle that the WA economy is stuck in only gets smoothed out when a forward- thinking government uses a boom to diversify the economy and insulate it from future busts” Dr Thomas said. 

“Most importantly boom periods should be used to get the government’s bureaucratic foot off the hose of commercial and industrial development.

“This includes making the approvals process more efficient and effective and cutting back taxes that undermine economic growth.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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