Hon Christian Porter BA(Hons) BEc LLB(UWA) MSc(Dist)(LSE) MLA

Hon Christian Porter BA(Hons) BEc LLB(UWA) MSc(Dist)(LSE) MLA

Former Treasurer; Attorney General

    Strong and stable outlook at mid-year review (Video)

    28/12/2011 12:00 AM
     
    • Western Australia set to record nation’s highest surplus for 2011-12
    • Estimated $209million surplus (2011-12) and surpluses forecast in all out years
    • Gross State Product growth, at 4.75 per cent, second highest in nation
    • WA has lowest State unemployment (4.3 per cent)

    Western Australia is set to record the highest surplus in the nation with a strong and stable economic outlook following the release of the mid-year review today.

     

    Treasurer Christian Porter said despite serious global instability and impending financial threats from the Federal Labor Government, the mid-year review confirmed sound financial outcomes for WA in 2011 12 and each of the out years.

     

    “Risks to the global economic outlook have intensified significantly since the May State Budget,” Mr Porter said.

     

    “Global financial instability has intensified on the back of ongoing concerns with the European debt crisis and a slower than expected recovery in the United States economy.

     

    “However, despite volatility in the $US/$A exchange rate and commodity prices; and a very slow WA housing market, the mid-year review still projects a surplus of $209million in 2011-12 and surpluses in each year of the forward estimates.” 

     

    WA’s revised surplus estimate is one of only three surpluses forecast by the States and Territories (Victoria is projecting a $148million surplus and the Northern Territory is projecting a $138million surplus for 2011 12).  New South Wales, Queensland, South Australia and Tasmania are all forecasting deficits, as is the Commonwealth.

     

    However, the Treasurer said the projected surplus is lower than that forecast at Budget time, mainly due to weaker projections for royalty revenue and transfer duty, which are now estimated to be down a combined $318million this financial year.

     

    Net debt at June 30, 2012 is now projected to be $16.6billion, $709million lower than at Budget time.  This is due to the impact of a lower net debt outcome in 2010-11 (down $1.4billion) then being partly offset by the lower operating surplus now forecast for 2011-12 and additional infrastructure investment.

     

    Despite considerable challenges caused by global economic uncertainty and Federal Labor policies which negatively impact WA, our domestic economic outlook remains positive with a substantial pipeline of investment in the resources sector continuing to underpin healthy levels of economic activity across most economic sectors in WA and the outlook is for strong export growth into the future. 

     

    Gross State Product growth has subsequently been revised up to 4.75 per cent, the second highest growth in the nation (up from 4.5 per cent at Budget time), and to 4.25 per cent in both 2012-13 and 2013-14 (up from 4 per cent at Budget time). 

     

    Demand for labour has also been strong, which is reflected in WA having an unemployment rate that, at 4.3 per cent, is the lowest of any State in Australia.

     

    “The key contributing factor to WA’s net debt is the need to borrow to build critical infrastructure because of the Federal Government allowing massive decreases in the return of GST monies to WA,” Mr Porter said.

     

    “The Government continues to fight for a fairer share of GST revenue to help fund the State's substantial infrastructure requirements.  However, WA is still forecast to lose $12billion in GST revenue over the five years to 2014-15 and this is a significant financial barrier to providing strategic infrastructure to benefit both the WA and national economies.

     

    “Recent moves by the Federal Treasurer to request the GST Review Panel examine options to penalise States that increase royalties presents a further potential threat to WA’s finances.”

     

    Importantly, the Treasurer said the projected levels of borrowing for infrastructure and net debt remained affordable and completely consistent with the State’s triple-A credit rating.

     

    Net interest costs as a share of revenue are projected to reach 2.7 per cent by 2014-15, which is well below the Government’s own limit of 4.5 per cent.

     

    Expense growth last financial year was the lowest in seven years and the original estimate of expenses growth of 7.9 per cent for 2011-12 has been increased to 11.6 per cent. This higher estimated rate of year-on-year growth largely reflects the impact of the lower than expected expenses in 2010-11, rather than additional expenditure in 2011-12.

     

    “New expenditure in 2011-12 only represents 0.5 per cent of the estimated increase in expenditure growth,” Mr Porter said.

     

    “Of critical importance is that growth in the public sector wages bill has stabilised with the estimate being a 7.2 per cent increase in wages growth in 2011-12 compared to an average of 8.8 per cent under the previous Labor government.

     

    “The containment of wages growth and delivering on previously announced savings initiatives remains a key focus of the State Government.”

     

          Fact File

    • Other highlights in the mid-year review:
      • the full delivery of the Government’s budget initiative of a five per cent efficiency dividend on Government Trading Enterprises, with total savings of $524million identified over the period 2011-12 to 2014-15
      • a further 333 voluntary separations taken up in 2011-12, bringing the total number of voluntary separations over the last three years to 1,135, resulting in savings of about $54million per year
      • approved growth in government agency staff levels in 2011-12 of just 1.7 per cent, about half the rate of growth of recent years
      • general Government sector salaries growth of 7.2 per cent in 2011-12, which is a significant turnaround from the last years under the previous Labor government
      • public sector wage outcomes consistent with the Government’s wages policy
      • settlement of the contractual claims for the Perth Arena extension of time and related delay damages of $63.5million
    • The full report can be found at http://www.treasury.wa.gov.au

    Treasurer's office - 9222 8800

    Video: Presentation