The Barnett Government’s wafer thin budget surplus has been eroded even further due to falling iron ore royalties as Troy Buswell’s mid-year financial review has set the stage for a frugal State election campaign.
The surplus, pegged at $196 million when then-treasurer Christian Porter handed down his last Budget in May has now been shaved to $140 million.
The Government has been forced to write down its revenue forecasts by $159 million in 2012-13, with a $605 million collapse in mining revenue as a result of weaker prices and a persistently high Australian dollar offset somewhat by a bumper $456 million increase in payroll tax receipts and $170 million increase in GST payments as a result of a recalculation of WA’s share of the national pool due to our increasing population.
On the spending side, Mr Buswell’s determination to contain the Government’s spending growth appears to be making headway, with spending now forecast to be $103 million less than was predicted at Budget time.
But public sector net debt continues to balloon. While the 2012-13 projection has fallen slightly from $18.59 billion to $18.23 billion, Treasury predicts debt, which was set to peak at $23.16 billion in 2014-15 before falling, will now continue to grow throughout the out years to a whopping $24.77 billion in 2015-16.
The mid-year review underscores the challenges facing both sides of politics in the lead up to the election, painting a picture of a State whose growing population and booming economy are placing incredible pressures on government to find more money to fund services in health and education.
But that economic growth is not translating into increased Government revenue, with revenues set to grow a paltry 0.4 per cent in 2012-13, despite China-esque economic growth of 6 per cent, inflation of 3.25 per cent and roaring population growth of 2.8 per cent.
That revenue growth compares to an average on the past ten years of 8 per cent a year.
Meanwhile, Mr Buswell has managed to contain expense growth to 2.5 per cent, effectively a cut in spending in real terms, compared to 10.2 per cent in 2011-12.
The worsening revenue situation has Treasury projecting a budget deficit in 2013-14 of $187 million, though Mr Buswell promised the Government would take corrective measures if it was re-elected to deliver a surplus next year.
Mr Buswell said the mid-year review highlighted that “there is not a lot of room to move” for both major parties to make big-spending promises in the election campaign.
“We have a challenge around deficit and surplus and a challenge around debt. We have a very tight set of financial parameters over which to fight the election,” Mr Buswell said.
He sought to score political points over the Labor Opposition by highlighting the cost of election promises already made, including a pledge to abolish the subsidy city electricity consumers pay to equalise the power prices of country consumers, and the cost of its ambitious Metronet public transport initiative.
Mr Buswell claimed the Opposition’s promises had created a “massive budget black hole” worth $1.7 billion and Metronet would cost an extra $6.4 billion.
“None of these (spending commitments) are in the forward estimates,” Mr Buswell said.
But the move backfired when he was forced to concede that the Government’s own big-spending public transport pledge – an as-yet uncosted light rail line to Mirrabooka that Premier Colin Barnett has touted as a centrepiece of the Government’s election campaign – is totally unfunded save for $16 million of planning money.
Other projects the Government has floated, including the $600 million Roe Highway Stage 8 extension, a $61 million bus rapid transit service to Ellenbrook and $80 million Ocean Reef Marina are also unfunded.
Mr Buswell said the Government had yet to commit to those projects, describing them as “works in progress”, but conceded it would be difficult to deliver all of them.
“That’s a fair assumption,” he said. “We haven’t come out, though, and promised heavy rail to every marginal electorate in Perth.
Shadow treasurer Ben Wyatt described the mid-year review as “the worst set of finances in a generation”.
“(The Government inherited) the strongest set of finances in Australia, record low debt, and $1 billion surpluses on the back of what was an extraordinary asset investment program by the former Labor government,” Mr Wyatt said. “In just four years, they’ve managed to turn that into a disaster.
“Troy Buswell and Colin Barnett have emerged as the greatest economic vandals WA has seen over the past 10 to 15 years.”