Surplus of $196million in 2012-13
WA’s economic growth forecast at 4.75% in 2012-13
Savings initiatives to total $4.9billion over 4 years
Plans for Future Fund announced
Treasurer Christian Porter today announced a surplus of $196million for the 2012-13 State Budget, with budget surpluses forecast across the forward estimates period to 2015-16.
Mr Porter said strong economic growth of 4.75 per cent was forecast in Western Australia for 2012-13.
“The WA economy is currently outperforming the rest of Australia,” he said.
“Business investment is strong, particularly in the resources sector, and exports will drive growth in 2012-13 and the next three years of this budget period.”
But the Treasurer said despite the strong economic outlook, the State faced a challenging revenue and fiscal outlook.
“This reflects growth being concentrated in areas not covered directly by the State’s revenue base, most noticeably the massive LNG projects such as Gorgon and Wheatstone which fall under the Commonwealth’s Petroleum Resource Rent Tax,” he said.
In addition, WA’s share of GST payments was forecast to decline dramatically over the coming years and weak household consumption in other States has contributed to lower national GST collections, the Treasurer said.
WA will receive 55 per cent of its population share of the GST in 2012-13, and this was expected to decline to just 25 per cent by 2015-16.
“The Federal Labor Government’s decision to cut WA’s GST share is the single greatest economic threat to WA. Our declining GST revenue represents a hit to the State’s finances of about $662million in 2012-13 alone,” Mr Porter said.
“Relative to its full population share, WA will lose $15.3billion in GST revenue over the five year period from 2011-12 to 2015-16.”
The Treasurer said the 2012-13 State Budget contained major re-prioritisation of service delivery, with a range of new State Government initiatives being introduced and funded through savings measures.
Mr Porter said the savings initiatives totalled $4.9billion over four years and included:
an efficiency dividend to be applied to public sector agencies from 2012-13, starting at two per cent for all departments (one per cent for Education), with additional one per cent dividends to be achieved in each of the three financial years to 2015-16
a further efficiency dividend for Government Trading Enterprises to be measured as a percentage of the discretionary spending, starting at 2.5 per cent in 2012-13 with an additional 1.5 per cent in 2013-14, 1.5 per cent in 2014-15 and 0.5 per cent in 2015-16
a two-year cap on the growth in the number of public sector workers to further control public sector salaries expenses. This measure will require all departments to operate for the next two financial years inside their FTE cap as it was set in 2011-12
a formal policy of limiting general government sector FTE growth to 1.5 per cent per year in 2014-15 and 2015-16
deferral of spending on a range of capital works projects across a number of agencies.
The new savings measures, along with the Government’s previous savings initiatives, will ensure growth in public sector expenses will be contained over the forward estimates period.
The Treasurer also announced that a Future Fund will be created by the transfer of over $1billion in seed capital (over the period 2012-13 to 2015-16), being monies from the Royalties for Regions Fund, which, as it has previously been announced, would not be spent as part of the Royalties for Regions program. These monies are comprised of:
three per cent efficiency dividend and other savings previously agreed to and applied to the Royalties for Regions Fund between 2009-10 and 2013-14 totalling $223million
25 per cent of the revenue achieved through the 2011-12 Budget decision to remove the concessional royalty rate for iron ore ‘fines’. This 25 per cent is estimated at $820million by 2015-16 and, as previously agreed by the Nationals leader Brendon Grylls, would not be spent but quarantined in the Royalties for Regions Fund for debt reduction purposes.
Once the seed capital is in place in 2016-17; for each of the 16 years thereafter, the Fund will receive at least one per cent of the State’s annual royalty revenue - initially estimated at between $65million to $70million per annum. Furthermore, the interest earnings on the principal will also be diverted back into the Future Fund each year.
The State Budget also contains significant investments in infrastructure to deliver lasting assets for future Western Australians, and to transform WA into a vibrant State.
A total of $7.6billion will be spent on the Governments’ Asset Investment Program in 2012-13 and $26.4billion over four years. This funding will ensure projects including the Waterfront development, Perth Stadium, the New Children’s Hospital, the Fiona Stanley Hospital, Perth City Link and Perth Arena are progressed.
To fund the significant investment in infrastructure, the Budget forecasts net debt to increase to a peak of $23.2billion by June 30, 2015, before decreasing to $22.9billion by June 30, 2016.
“The level of net debt is affordable, with total non-financial public sector net interest costs to reach a maximum of 2.9 per cent of revenue in 2014-15, which is comfortably within the Government’s 4.5 per cent target limit. This is consistent with maintaining the State’s triple-A credit rating,” the Treasurer said.
Economic growth of 6% in 2011-12 & 4.75% in 2012-13
General Govt operating surplus of $484m in 2011-12 and $196m surplus in 2012-13
New savings measures totalling $4.9billion
More than a $1b down-payment to the new Western Australian Future Fund
$180m additional royalty revenue following a royalty rate review in consultation with industry
$7.6billion infrastructure program in 2012-13 and $26.4billion over 4 years
Net debt peak of $23.2billion in 2014-15, dropping to $22.9billion in 2015-16
Treasurer’s office - 6552 5600