The monthly report of General Government Finances for July - August 2009 were released today, the State’s first outturn reports for the current financial year.

Treasurer Troy Buswell said the reports showed ongoing pressure on the State’s finances, particularly from the rising Australian dollar and its impact on royalty revenue.

“Spending growth has been impacted by several other extraordinary items at the start of this financial year, including Federal stimulus spending,” Mr Buswell said.

“This report is a timely reminder that Western Australia’s renewed business confidence and major forward investments will take time to flow through to the bottom line.

“The Government will continue to maximise taxpayers’ money through initiatives such as Value for Money audits in Health, Education, Environment and Commerce; Wages Policy and Full Time Equivalent (FTE) ceiling.

“This includes finalising the implementation of the corrective measures announced in the May State Budget and a further suite of corrective measures due to be announced in the mid-year review.”

A general government sector operating deficit of $687million was recorded for the two months to August 31, 2009, down from the $73million operating surplus outcome for the same period last year.

“Revenue during the first two months of this year was $110million lower than at this time in 2008‑09.  This fits with the revenue trend seen through most of the second half of 2008-09,” the Treasurer said.

“The impact of the global downturn did not become evident in the State’s revenue collections until about September 2008, which is outside the period covered in these reports.”

The reports showed Federal Government GST grants and North West Shelf grants were down a combined $236million, partially offset by higher tied grants, including stimulus spending.

Taxation revenue fell $32million, or three per cent, due to this year’s later issue of Emergency Services Levy invoices.

“Expense growth of 22 per cent for July and August was driven by several extraordinary items, including Federal stimulus spending. Stripping out extraordinary items reveals spending growth of 9.9 per cent for the period,” Mr Buswell said.

Many of the extraordinary costs shown in the report were factored into the full‑year Budget estimates delivered in May.

Overall, general government expenditure increased by $650million during July and August, relative to the same period last year.

$244million of this was related to stimulus spending initiated by the Federal Government and a further $43million reflected last year’s State Government decision to increase subsidies to Synergy as part of the transition arrangements to cost‑reflective electricity tariffs.

An accounting adjustment raised in July 2009 compared with October 2008 effectively brought forward the timing of spending by about $73million in the two months to August 31, 2009.

Excluding these extraordinary items, July and August spending increased by $290million, or 9.9 per cent, relative to the same period last year.

“About $159million, or 55 per cent, of this remaining increase in spending is in higher salary costs, reflecting the timing of wage rate increases and staffing levels, particularly in Health and the Education and Training sectors,” he said.

“These rates of growth are expected to moderate in subsequent reports as some of the more significant increases, such as the impacts of the September 2008 teachers wage outcome.

“The Government is very aware of the pressure that salary increases place on State finances and is actively managing employee costs with an FTE ceiling, Wages Policy and the voluntary severance program announced in the 2009‑10 State Budget.”

Mr Buswell noted the volatility in the monthly reports and cautioned against inferring full‑year outcomes from the July and August 2009 figures.

“However, we expect the rising Australian dollar will continue to put pressure on royalty revenues,” he said.

The next update of budget projections would be provided in the mid-year review, to be released by December 31.

The monthly statement is available at http://www.dtf.wa.gov.au