The State Government has targeted expense growth in the 2017-18 Budget as being the key to returning the Budget to surplus and beginning the long-term task of debt reduction.
In order to set the Budget back on the path of repair, general government expense growth since the Pre-election Financial Projections Statements (PFPS) has been limited to just $154 million in 2017-18. In underlying terms, this puts expense growth at just 2.4 per cent – setting up the forward estimates for a low growth recurrent spending trajectory.
Record net debt inherited from the previous Government is now forecast to reach $43.8 billion at June 30, 2020. In the absence of the McGowan Government’s Budget repair measures, net debt at June 30, 2021 would be forecast to increase to $47.2 billion.
Across the forward estimates, the Government has identified $3.5 billion of Budget repair and savings measures. The public sector will deliver $1.7 billion of those savings, the Government Trading Enterprises will contribute $473 million and the corporate sector will deliver $922 million in extra revenue.
The Voluntary Targeted Separation Scheme will be a feature in these savings focused on achieving 3,000 full-time equivalent public sector separations, with priority to be given to agencies subject to the recent 40 per cent reduction in government departments.
Importantly, 20 per cent of the savings from this scheme will be retained by participating agencies to invest in workforce renewal and the redesign of service delivery, with a focus on digital transformation, frontline services, and the recruitment of entry level employees.
In addition, the introduction of the Foreign Buyers Surcharge and point of consumption wagering tax will provide an additional $100 million in net debt benefits over the forward estimates.
The McGowan Government is delivering responsible financial management and Budget repair that is fair, with the impact on struggling families and small businesses minimised.
The Royalties for Regions program will continue, as promised, under the McGowan Government, with this Budget including $4 billion of projects and programs funded over the next four years by Royalties for Regions.
The economic headwinds that have hit the State this year cannot be ignored.
General government revenue has been written-down by $5 billion to 2020-21 yet due to the savings measures introduced, the increase in total public sector net debt since the $42.3 billion forecast from the Economic and Fiscal Outlook update published in April 2017.
The increase in net debt since the PFPS is almost entirely attributable to the forecast $2 billion revision to the outlook for Western Australia’s GST grants following the release of Australian Bureau of Statistics 2016 Census data.
Despite the Budget’s constrained expense growth and the Government’s identification of Budget repair measures to offset a reduction in the State’s revenue, the continued downward revisions to GST grants and reductions in other Federal Government grants (totalling $340 million in net terms) has meant the State’s operating position has worsened by a forecast $842 million in 2017-18 relative to the PFPS.
However, despite a worsening operating position in 2017-18, responsible financial management over the medium term is expected to deliver a forecast general government operating surplus in 2020-21, the first operating surplus since 2013-14.
Even though the current Government is operating in a tight fiscal environment, it has still managed to strike the right balance and reflect the delivery of $3.7 billion in spending on its election commitments as part of the 2017-18 Budget, at a cost to a budget of just $603 million in net debt terms.
The Western Australian economy is showing signs of recovery in the State Budget, with economic growth (measured in terms of Gross State Product) forecast to increase by three per cent in 2017-18, up from an estimate of just 0.25 per cent in 2016-17.
For more 2017-18 State Budget information, visit http://www.ourstatebudget.wa.gov.au
Source: Government of Western Australia.