WA Economy Strong Despite Drought & Cuts To G.S.T. Revenues

WA Economy Strong Despite Drought & Cuts To G.S.T. Revenues

Western Australia Treasurer Christian Porter

WA’s Economic Recovery Remains On Track

Victor P Taffa

The Release of Western Australia’s 2010/11 Government Mid-Year Financial Projections Statement today, has confirmed the sound position of the State’s Finances.

Treasurer Christian Porter said net debt levels in the mid-year review remained affordable and consistent with the State’s current Triple-A Credit Rating.

“Overall, total Public Sector net debt levels are projected to be slightly lower than forecast in the May budget.” Mr. Porter said.

“Stronger revenue performance, particularly in iron ore royalties, will be invested in enhanced services and infrastructure, and the WA economy is expected to strengthen with growth returning to about 4-5% p.a.”

“The Projected Growth reflects robust global demand for the State’s resources, especially from key markets in Asia, and the sustained strength in global commodity markets has reinvigorated investment in Major Resource Projects.” Mr. Porter said.

The Treasurer said both property market activity and growth in household spending had been relatively subdued so far in 2010/11, reflecting higher interest rates.

The drought is also expected to impact heavily on the State’s Agriculture Exports. These factors have led to a slight downward revision to economic growth in 2010/11 from 4.5 % forecast at Budget time to 4.0 %.

Mr. Porter said the State’s headline measure of budget performance, the general Government net operating balance, was forecast to be in surplus across all budget years.

“The mid-year review forecasts a surplus of $758 Million in 2010/11, compared to the May budget estimate of $286 Million.” Mr. Porter said.

“This stronger outcome is mainly due to higher iron ore royalties flowing from increases in prices and the State Government’s decision to remove concessional Royalty Rates.”

Surpluses of about $1 Billion are forecast for 2011/12 and 2012/13 before declining to $147 Million in 2013/14.

“The Reduction in the surplus for 2013/14 is dominated by a decline in WA’s share of the GST.” the Treasurer said.

“WA will receive just 4.9 % of the National GST Pool in 2013/14, which is significantly below the State’s 10.5 % share of the Nation’s Population.” Mr. Porter said.

“This penalty for our economic success is not in the interests of this State or the nation more broadly.  If WA were to receive its population share of GST grants in 2013/14, the GST revenue flowing to our State in that year would be more than $3 Billion higher.”

Mr. Porter said the stronger surpluses in the next few years, together with the better than expected outcome for 2009/10, would fund new infrastructure projects without the need for a substantial increase in borrowings.

The Government has allocated the additional revenue to a $1.7 Billion upward revision to the State’s four-year infrastructure Program.

“This includes $567 Million on work over the forward estimates period on the $1.2 Billion new children’s hospital; $370 Million on water infrastructure in the Pilbara; and $395 Million for social housing and land development.” the Treasurer said.

“The Government is serious about providing the necessary social and economic infrastructure to support our growing economy and population, and the mid-year review demonstrates we are achieving this in an affordable and sustainable manner.” Mr. Porter said.