There's no sugar coating the State Budget message
There’s no sugar-coating the message from Treasurer Mike Nahan.
The domestic side of the WA economy has already slipped into recession and it’s going to sit there for some time.
The Treasurer opened his briefing on the 2015-16 budget saying WA had “gone through some of the best times in our State’s history”.
He stopped before finishing one of Charles Dickens’ most famous lines – that the state of WA is about to go through some of its toughest times.
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Unemployment will rise, wages in the private sector are falling in real terms, miners are ditching expansion plans like Carlton gets rid of coaches while homeowners and business operators are putting what little cash they have under their mattresses.
House prices, which at the peak of boom were growing by thousands of dollars are weak, are now going to fail to keep up with inflation.
Exports will continue to grow but the value of those exports will be substantially lower than expected.
Ordinary people and business don’t feel the economic impact of exports (which ultimately flow to the majority foreign shareholders). They absorb the impact of declining construction, declining investment and declining spending.
That’s a recession.
The downturn , which most people in WA can already feel, will surpass the 1990-91 recession, the stockmarket crash of 1987 and the early 1980s resources (non) boom.
It means that the State will have three consecutive years of budget deficits. This year’s, at close to $3 billion, is eye-wateringly large.
Once you take into account the capital side of the Budget, the deficit is more than $5 billion. Gross borrowings, the stuff taxpayers has to pay back, are growing and on their way to $55 billion in 2018-19.
Correctly, the Government is not chasing this huge income collapse by slashing spending or jacking up taxes (although they’ve done a little of each).
Just don’t call Dr Nahan a Keynesian.
Like the good IPA man that he is, government spending to prop up the economy is a dangerous thing.
Except when you’re Treasurer and that’s exactly what you do.
Capital works aren’t being cut. The Treasurer enthused about the jobs being created by the projects under way or proposed including the Perth Freight Link which is magically going to produce 11,000 jobs.
“(The State) needs it for the infrastructure and to provide jobs,” Dr Nahan said in what would pass as a Keynesian analysis in any economics classroom in the world.
Given the state of this Budget, Dickens rather than Keynes might even be a better starting point.
