Need for GST reform never greater for WA

Thursday, 22 December 2016
 
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• ​WA economy continues to grow as export sector expands
• About $500 million improvement in both operating balance and net debt forecasts for 2016-17
• Need for reform to unfair GST distribution system intensifies

The 2016-17 Mid-year Review released today by the Liberal National Government shows higher iron ore prices have translated into a $3.7 billion boost to royalty income, as well as nearly $1 billion in improved operating balance outcomes in 2016-17 and 2017-18.

Treasurer Mike Nahan said $527 million had been shaved off the forecast operating deficit, revised down from $3.9 billion in the May Budget to $3.4 billion for 2016-17, as well as improvements in net debt forecasts across the forward estimates.

Dr Nahan said the recent increase in commodity prices, combined with increases in export volumes from major resources projects, was driving Western Australia's export sector.  

"Continuing strong growth in net exports, due to a ramp up in iron ore and LNG production, is expected to support growth in the economy over the budget period, albeit at slower rates than recent historical highs," the Treasurer said.

"Economic growth has undoubtedly slowed, but the fact is we're still growing and the economy is now 40 per cent bigger than when we came to office in 2008-09."

However, Dr Nahan warned the projected additional $3.7 billion in royalty income over the forward estimates was expected to be largely off-set by downward revisions to taxation revenue and GST grants, if GST reform was not forthcoming in the four-year budget period.

"The State Government cannot stress enough how important reform of the grossly unfair GST distribution system is, as WA's higher royalty income will largely be redistributed to other States and Territories," he said.

"The Mid-year Review shows that adjustments in the labour market, combined with a softer property market and a general easing in domestic economic activity, are expected to result in substantially lower payroll tax and transfer duty collections relative to budget."

The Mid-year Review forecasts also demonstrate the ongoing success of Government efforts to improve the efficiency of the public sector and limit growth in general government expenditure as a result of the roll-out of the Agency Expenditure Review program, and the successful implementation of the Government's 1.5 per cent wages policy.

Spending measures in the Mid-year Review include: 

• an additional $316 million in spending on hospital services
• new and expanded schools, including an additional $90 million to deliver the Western Suburbs Secondary School Strategy and $30 million to expand and upgrade Margaret River Senior High School
• $43 million to reconfigure the Spinal Cord Injury Service
• $17 million to commence construction of the Armadale Courthouse and Police Complex (bringing total spending committed to this project to $86 million (including works with an estimated total cost of $79 million, and previously announced spending on land acquisitions and planning))
• an additional $10 million for tourism marketing and events funding
• $34 million to build grains research and development capacity
• $1.3 million for the South Coast Aquaculture Development Zone.

The Treasurer said the ongoing impact of the revenue shocks of recent years was clearly the driving factor in the State's fiscal outlook, with unavoidable operating deficits projected in the short term.

"The State Government will continue to progress our asset sales program, which represents a significant upside to the Mid year Review estimates given that these are only written into the estimates when sales are finalised," he said.

Fact File

• A general government operating deficit of $3.4 billion is projected for 2016-17, a $527 million improvement on the $3.9 billion deficit forecast in the May Budget
• Over the four-year budget period:
  • Royalty income revised up by $3.7 billion, largely due to the impact of higher iron ore prices
  • GST revenue revised down by $1.6 billion
  • Taxation revenue revised down by $1.9 billion
• General government expenditure is projected to increase by 4.9% in 2016-17, and by an average of 1.4% per annum over the period of 2017-18 to 2019-20
• Total public sector net debt is forecast to reach $39.7 billion by June 30, 2020, down from $40.2 billion forecasted in the May Budget
• For more information, visit http://www.treasury.wa.gov.au