The Barnett Government has abandoned making any decision to build the MAX light rail project until after the next State election, breaking an election promise that the project would be up and running by 2018.
The Government will now refuse to commit to the project before mid-2017 as it unveiled a mid-year economic review that slashes $1.9 billion of infrastructure spending over the next four years.
The Government will still proceed with its other big-ticket public transport project, the airport-Forrestfield rail link, but it will not be completed until 2020, two years after what was promised during the election.
Treasurer Troy Buswell delivered the Mid Year Economic Financial Outlook today, saying overall savings would reduce net debt from $28.3 billion to $26.9 billion and reduce gross borrowings by $2.2 billion, from $50.2 billion to around $48 billion.
The decision on MAX light rail won't be made and the business case to proceed not considered by Government until 2017.
Mr Buswell said the cost cutting and deferrals would "put the brakes on the State's debt which is one of the key components in returning to our AAA credit rating".
“This will effectively reduce net debt from around $28.3 billion to $26.9 billion and reduce gross borrowings by $2.2 billion from $50.2 billion to around $48 billion and put the brakes on the State’s debt which is one of the key components in returning to our AAA credit rating,” he said.
The mid-year review reveals huge blowouts in spending in Health, Education and on subsidising electricity corporation Synergy.
The Government has been forced to find an extra $191 million for Health, including expenses related transitioning the Perth Children’s Hospital, the failure of the department to meet its leave liability cap and increased depreciation expenses.
The Fiona Stanley Hospital contract renegotiation with Serco cost $53 million.
The Government has also removed any money from the Royal Perth Hospital redevelopment project to pay for future IT and transition capital costs at the Children’s Hospital.
Unanticipated student growth means the Department of Education’s budget has been topped up an extra $40 million.
The Government will be forced to spend an extra $105 million subsidising Synergy due declining residential demand for power, increased costs associated with renewable energy schemes, and increased capacity costs.
The Government is budgeting an extra $558 million for Synergy subsidies over four years, but Mr Buswell denied this was because of the Government’s promise to keep power prices to “at or about inflation”.
A raft of cuts include:
A 10 per cent reduction in general Government agencies’ estimated procurement expenditure for the last three quarters of 2013-14 with the exception of WA Police and smaller agencies, to save $92 million.
A cut to local government road funding to save $70million.
Reductions in Housing Authority, Water Corporation and Main Roads programs, to save $995 million.
Abandon planned expenditure on the Kwinana Bulk Jetty and Terminal facilities, to save $104 million.
“Our number one priority is to return the State to AAA status and that will mean constant evaluation of programs and projects to deliver better value for money to taxpayers,” Mr Buswell said.
The Government would maintain infrastructure spending of $24.4 billion over the forward estimates on projects including the Children’s Hospital, Elizabeth Quay foreshore development, new WA Museum and the Burswood stadium.
But the Airport and Forrestfield rail will not be complete until 2020, two years later than promised in the election campaign.
The Chamber of Commerce and Industry said the financial projections reinforced the urgent need for reforms that will shore up the State’s budget position and reclaim the ‘AAA’ credit rating.
“The Government has made some good headway in reducing debt through the restructure of its asset investment program. However, to address the structural issues facing the budget, the focus needs to shift to reducing Government expenditure,” CCI Chief Economist John Nicolaou said.
“At a time when excessive growth in spending has been recognised as a key risk to the State’s finances, the mid year review shows that the unsustainable growth in Government spending has continued."
“While the Government has announced some important measures to address these challenges, including through its expanded Fiscal Action Plan, these will not deliver the scale of reform needed to bring the budget back under control,” Mr Nicolaou said.