Western Australia is set to record the highest surplus among Australian states, with a strong and stable economic outlook following the release of the mid-year review. Treasurer Christian Porter said despite serious global instability and impending financial threats from the Federal Labour Government, the mid-year review confirmed sound financial outcomes for WA in 2011-12, and each of the following financial years.
Mr Porter said “Risks to the global economic outlook have intensified significantly since the May State Budget, 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 $209 million in 2011-12, and surpluses in each year of the forward estimates.”
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 $318 million this financial year.
Net debt at June 30, 2012 is now projected to be $16.6 billion, $709 million lower than at Budget time. This is due to the impact of a lower net debt outcome in 2010-11 (down $1.4 billion), being partly offset by the lower operating surplus now forecast for 2011-12, and additional infrastructure investment.
Despite considerable challenges, the State’s 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 of 4.3 per cent, that 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 $12 billion 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.”
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.
The full mid-year report can be found at: www.treasury.wa.gov.au