2014-15 WA Budget Brief
Budget of no surprises
The new Western Australian Treasurer, Mike Nahan handed down a ‘no surprises’ budget on May 8, largely adopting previous government commitments on infrastructure spending and avoiding any hard decisions on revenue or expenditure that would put State finances back on track.
- A budget surplus of $175m is forecast for WA in 2014-15. Although surpluses are projected throughout the forward estimates period (to 2017-18), they are wafer thin and significant expenditure restraint will be needed to protect the forecast surpluses. There is also limited action to arrest the growth in government debt. State net debt is now forecast to reach $24.9bn in 2014-15 and will exceed $29bn by 2017-18
- The WA government is forecasting a challenging revenue environment as the economy transitions from the resources construction boom. General government revenue growth is forecast to be 2.5% in 2014-15 and to average 3.6% over the forward estimates. A number of measures have been adopted to bolster revenue including increases in land tax rates and a reduction in the stamp duty exemption threshold for first home buyers purchasing existing dwellings
- Controlling expenditure growth is a key goal of this budget. General government expenditure is forecast to increase by 2.6% in 2014-15, increasing to an average growth rate of 3.5% over the forward estimates. However, the need to continue to meet growth in demand for front-line services (health, education, law and order) has added significantly to outlays. To help compensate for this, the government has flagged increases in fees and charges across electricity, water and public transport that will cost the average WA household an additional $324 per annum
- Despite shaving $243m off its asset investment program over the next four years, committed funds remain high, bottoming out at $5.4bn in 2015-16 before rising back to over $6bn by 2017-18. Last year, Deloitte Access Economics noted that more reform announcements might be forthcoming on the state’s capital investment program given the government’s fiscal constraints. Aside from the deferment of the MAX light rail project however (announced in December 2013), few other major cuts have been applied
- Gross state product growth for 2013-14 has been revised up to 3.75% in the current budget, reflecting stronger dwelling investment. However, growth in 2014-15 is now 0.5% lower than previously expected at 2.75% due to weaker than expected household consumption and business investment. The WA Government expects the state unemployment rate to continue rising, peaking at 5.5% in 2014-15, before dropping back to 4.75% in 2017-18
- Asset sales were again flagged by the Treasurer in the budget briefings, however, no sales have been included in the budget. The potential assets mentioned should not surprise the market given the government’s previous communications. The initial list of potential assets on the chopping block include individual ports (Utah Point and Kwinana Bulk Terminal), TAB, Perth Market Authority and surplus land attached to existing hospital sites. Deloitte Access Economics expects more announcements on this. While supportive of a considered asset sale program, we believe the government needs to demonstrate enthusiasm for broad based reform of government delivered services and, where appropriate, use of private sector delivery.
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