Premier Mark McGowan believes Western Australia’s record budget surplus of $5.6bn vindicates his Covid-19 hard border stance, as he prepares for a fight with “wildly angry” eastern states about the GST.
Delivering his first state budget as treasurer, Mr McGowan dodged questions about his tough border stance.
There are reports WA is not expected to open to states like NSW and Victoria until April.
However, he did confirm the expectation that international travel would not resume until September – in line with the commonwealth’s own budget.
“We just reflected the commonwealth budget (on the international border),” the Premier said on Thursday.
“There is no assumption around the state border (in the WA budget).
“The treasury estimates that basically in terms of travel there’s little impact … the real impact is if we have an outbreak.
“The budget says avoiding an outbreak is the most important thing we can do.”
Pressed further about reports the WA border could stay closed as late as April, he replied: “We haven’t set a date – what we want is West Australians to get vaccinated in large numbers.”
Mr McGowan reiterated his aim was for a vaccination rate of between 80 and 90 per cent.
While the border issue has been an ongoing battle for the past 18 months, the GST deal has been a war between jurisdictions for much longer.
Changes to the GST distribution in 2018, under then federal treasurer Scott Morrison, ensures WA keeps at least 70c of every dollar of revenue collected.
Without the change, Mr McGowan said WA’s share of GST revenue would have dropped to as low as 10c in the dollar by 2024.
Nonetheless, NSW has been the main driver in pushing to “unravel” the system and Mr McGowan said he anticipated other states would also be “wildly angry” about the GST after seeing WA’s economic success.
“They’ll be wanting to undo the GST deal because they failed to budget properly,” he said.
“NSW failed to manage Covid and so they’ll want us to pay.
“We have to fight back and we will continue to fight that.”
The surplus is largely thanks to the mining sector – especially iron ore, which treasury has predicted to be priced at $121/tonne in 2021-22, then down to $66 over the forward estimates.
The Premier said the conservative figure meant his government would avoid a deficit and not make the same mistakes of the Barnett government.
Mr McGowan suggested the volatility of WA’s most important commodity showed why the GST deal should not be changed upon review in 2025.
Iron ore prices had remained high for so long thanks to demand from China and less competition from Brazil, the Premier added.
Iron ore royalty income is estimated to decrease from its peak of $11.3bn in 2020-21 to $9.2bn in 2021-22.
This financial year, a $2.8bn net operating surplus is forecast, with strong surpluses expected over the forward estimates.
Aside from mining, the state has been aided by an increase in stamp duty cash and payroll tax receipts.
Meanwhile, WA’s net debt is forecast to decline for a third consecutive year in 2021-22 to $32.1bn.
Debt is expected to increase slightly the following year then remain “relatively stable”.
In another obvious dig at his critics, Mr McGowan noted WA had produced 60 per cent of the nation’s exports over the past year, with most going to China.
WA’s domestic economy has grown, with gross state product expected to climb 3.5 per cent this year, but it will likely moderate as international borders open and people travel overseas.
Mr McGowan said any incoming tourists were not expected to make up for that loss.
The unpredictability of the iron ore price was the other significant factor in that projection.
Unemployment sits at 4.6 per cent – the lowest since 2013 – and an additional 34,000 jobs are forecast for this year.
Mr McGowan noted WA had strong retail spend and a 88.7 per cent increase in building approvals, which was the strongest growth on record of all jurisdictions supported by the Building Bonus.
Dwelling investment is expected to grow by 27.25 per cent in 2021-22.
As previously announced, this year’s state budget will see an additional $1bn allocated to combating the Covid-19 pandemic.
That includes $605m for frontline police and health services, and community health and safety initiatives such as enhanced school cleaning and public transport.
Businesses will be supported via $219m, including small business grants and industry assistance, while $182m will be spent on economic recovery and other initiatives.
Mr McGowan said even in the middle of a global pandemic, WA’s finances remained on a stable footing.
“It shows the rewards of keeping WA Covid free,” he said.
“We have delivered the best economic and social outcomes in Australia and possibly the world.”
Meanwhile, the average WA household will be slugged an extra $99.36 per year for utilities and other fees under the 2020/21 state budget.
That is an increase of 1.6 per cent – less than the projected CPI of 1.75 per cent
Concessions, including the energy assistance payment, will also be available.
Public transport fares will also be frozen for another year.
It was also confirmed that the public sector wages policy – which has seen wage increases for public servants capped at $1000 since 2017 – will be reviewed one year earlier than originally planned.
Mr McGowan said the move was about recognising the reality of the situation, adding that unions would be consulted.
“We have a good financial position and we’ve had an extremely tough wages policy for four years, so we will review the policy,” he said.
“I think this is just a recognition of the world we’re in.”
But Mr McGowan would not weigh in on what he thought the wage increase should be.
The review will begin next week and will be ready for implementation next year.
Mr McGowan said overall his government was setting up the state for the long-term with this budget.
“Quite simply, WA is the strongest state in the nation, with the brightest future,” he said.
“This budget is built on a foundation of responsible financial management over the last four years.”
- Health and mental health – $1.9bn, including more staff, 223 general beds and 109 mental health beds to address “unprecedented demand”.
- Social housing – A record $875m investment, including a $750m Social Housing Investment Fund.
- Native forests – Move to end logging by 2024, with $350m to be spent over 10 years to expand WA’s softwood timber plantations.
- Desalination – $1.4bn down-payment for a new desalination plant, which will be powered by renewable energy.
- Education – $6.5bn on education and training, including $486m for infrastructure and $103m for mental health.
- Regional WA – $4.2bn for Royalties for Regions over four years. $9.1bn for regional infrastructure.
- Transport – $13b on road, rail and transport through to 2024-25.
- Businesses – It is not yet known whether the pandemic funding will be enough for struggling small businesses across the state.
- Capital works deferred – More than a dozen projects to be delayed, including the Casuarina Prison expansion, Albany Tafe upgrade, Armadale Tafe campus, Tonkin Hwy grade separations and the Great Northern Hwy-Bindoon bypass.
- Families split by the hard border. No confirmation on when the border will re-open.