western australia state budget 2018 -19 · western australia state budget 2018-19 improved...

11 May 2018

Hon Ben Wyatt, MLATREASURER

WESTERN AUSTRALIA

STATE BUDGET 2018-19

WESTERN AUSTRALIA STATE BUDGET 2018-19

SUMMARY State’s finances getting back on track

Net operating surplus of $1.8b over forward estimates period Lowest expense growth in over 20 years forecast for 2018-19 Total net debt down $3.2b relative to 2017-18 Budget

WA economy turning the corner GSP growth of 3.25% forecast for 2018-19 Forecast employment growth of 50,000 over two years

Significant new investment in this Budget to deliver the McGowan Labor Government’s election commitments Public transport and roads Social and affordable housing

Still a lot more work to do Fair share for WA Ongoing surpluses needed to pay down debt

2


RESPONSIBLE FINANCIAL MANAGEMENT

Government’s clear focus remains on constraining recurrent expenditure growth while delivering our election commitments

In 2017-18, underlying expense growth revised down to just 1.6% Follows actual expense growth of 0.3% in first half of 2017-18

Expense growth of just 1.2% p.a. across the forward estimates, compared to average of 6.4% p.a. under previous Government Equates to $17b difference over forward estimates period

3


STATE FINANCES BACK ON TRACKTHE GOVERNMENT’S PLAN IS WORKING Constrain expense growth

4

25

27

29

31

33

35

37

39

2017-18 2018-19 2019-20 2020-21 2021-22

GENERAL GOVERNMENT SECTOR EXPENSES$ Billion

Average growth= 1.2% p.a.

Liberal-National average growth

= 6.4% p.a.

$17 Billion


Low expense growth achieved through: a reinvigorated ERC process and Cabinet

significant reprioritisation of existing expenditure‒ election commitments mostly funded from reprioritised spending‒ new programs find new funding sources

2017-18 Budget repair measures‒ largely successfully implemented ‒ embedded low cost growth‒ reduced size and/or duplication in the public sector

RECORD LOW EXPENSE GROWTH

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STATE FINANCES BACK ON TRACKTHE GOVERNMENT’S PLAN IS WORKING Low expense growth delivers cash surpluses

6

-5

-4

-3

-2

-1

0

1

2

2001-02 2005-06 2009-10 2013-14 2017-18 2021-22

TOTAL PUBLIC SECTOR CASH SURPLUS/DEFICIT$ Billion

Liberal-NationalLaborForecast


STATE FINANCES BACK ON TRACKTHE GOVERNMENT’S PLAN IS WORKING Cash surpluses pay down State debt

7

0

5

10

15

20

25

30

35

40

45

2002 2006 2010 2014 2018 2022

TOTAL PUBLIC SECTOR NET DEBT AT 30 JUNE$ Billion

Liberal-NationalLabor Forecast


Improved efficiency in the delivery of hospital services has seen the unit cost of hospital activity fall in 2017-18, bringing WA closer to the national average cost

More work to do Final report of Sustainable Health Review due in Nov 2018

RECORD LOW EXPENSE GROWTHMORE EFFICIENT DELIVERY OF HEALTH SERVICES

8

Cost gap 2016-1720.2%

Cost gap2017-1816.6%

Cost gap2021-2213.6%


$1,000 wages policy successfully implemented Legislation passed to freeze pay of Parliamentarians, Judges and

senior public servants 20% reduction in Senior Executive Service achieved Voluntary Targeted Separation Scheme delivering significant savings

around 2,050 separations expected by 30 June 2018, with remaining 950 separations over forward estimates

RECORD LOW EXPENSE GROWTHEMBEDDED WITH HELP OF BUDGET REPAIR Budget repair measures from last year are in progress and on track

9


STATE FINANCES BACK ON TRACKTURNAROUND SINCE 2017-18 BUDGET $2.8b improvement in net operating balance

10

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2017-18 2018-19 2019-20 2020-21 2021-22

2017-18 Budget2018-19 Budget

IMPROVEMENT SINCE 2017-18 BUDGETGeneral Government Net Operating Balance

$ Million


STATE FINANCES BACK ON TRACKTURNAROUND SINCE 2017-18 BUDGET $3.2b improvement in forecast level of net debt

11

30

32

34

36

38

40

42

44

46

2017-18 2018-19 2019-20 2020-21 2021-22

2017-18 Budget2018-19 Budget

IMPROVEMENT SINCE 2017-18 BUDGETTotal Public Sector Net Debt at 30 June

$ Billion


STATE FINANCES BACK ON TRACKREVENUE GROWTH HAS STABILISED Revenue growth remains subdued

12

Moderate revenue growth of 3.5% p.a. forecast over forward estimates

Follows underlying revenue growth of just 0.9% in 2017-18

Compares to decade-average growth of 4.4% p.a.

(a) Abstracting from the one-off impacts of the MOG changes, upfront Commonwealth infrastructure funding, and revenue measures announced in the 2017-18 Budget.

0

1

2

3

4

5

6

2017-18 2018-19 2019-20 2020-21 2021-22

REVENUE GROWTHGeneral Government SectorPercent

Average growth

= 3.5% p.a.

(a)


RESPONSIBLE FINANCIAL MANAGEMENTKEY BUDGET AGGREGATES Budget remains on track to return to surplus by 2020-21

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(a) Underlying revenue and expense growth of 0.9% and 1.6% respectively.

2017-18 2018-19 2019-20 2020-21 2021-22Estimated Budget Forw ard Forw ard Forw ard

Actual Estimate Estimate Estimate Estimate

GENERAL GOVERNMENT SECTORNet Operating Balance ($m) -1,327 -906 -160 1,295 1,531

Revenue ($m) 28,874 29,572 30,715 32,310 33,187 Revenue Grow th (%) 7.3 (a) 2.4 3.9 5.2 2.7

Expenses ($m) 30,201 30,478 30,875 31,015 31,656 Expense Grow th (%) 2.8 (a) 0.9 1.3 0.5 2.1

TOTAL PUBLIC SECTORNet Debt at 30 June ($m) 35,951 39,103 40,853 40,413 39,745 Net Debt as a Share of GSP (%) 13.7 14.5 14.6 13.9 13.0Asset Investment Program ($m) 5,522 6,248 5,449 4,945 4,872 Cash Surplus/Deficit ($m) -3,468 -2,961 -1,553 572 798


RESPONSIBLE FINANCIAL MANAGEMENTKEY BUDGET AGGREGATE ASSUMPTIONS

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Forecasts of Major Economic Parameters

2017-18 2018-19 2019-20 2017-18 2018-19 2019-20% % % % % %

GSP/GDP (real growth) 2.5 3.25 3.75 2.75 3.0 3.0Exports (real growth) 5.5 7.5 3.5 2.5 4.0 2.5Employment (growth) 2.25 1.5 2.0 2.75 1.5 1.5Unemployment rate 5.75 5.75 5.5 5.5 5.25 5.25Wage Price Index growth 1.5 1.75 2.75 2.25 2.75 3.25CPI growth 1.0 1.5 2.0 2.0 2.25 2.5Iron ore price (CFR) 68.3 61.9 60.8 68.1 63.2 63.2

WA 2018-19 Budget Commonwealth 2018-19 Budget


CREATING JOBS & STRENGTHENING THE ECONOMY

Exports to remain major driver of growth in short term

Household consumption expected to take over as major driver of growth in medium term

Business investment projected to return to growth from 2019-20

15

-10

-8

-6

-4

-2

0

2

4

6

8

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Balancing ItemDwelling InvestmentGovernment SpendingBusiness InvestmentHousehold ConsumptionNet ExportsGross State Product

PercentagePoints

GROSS STATE PRODUCTContributions to Growth

Forecast


WA ECONOMY HAS TURNED THE CORNER

Domestic economic activity is approaching its trough

16

-10

-5

0

5

10

15

20

2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21

Forecast

Percent

DOMESTIC ECONOMIC GROWTHState Final Demand



Overall activity (GSP) has troughed and is on an upwards trajectory

17

-4

-2

0

2

4

6

8

10

12

2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21

Forecast

Percent

ECONOMIC GROWTH Gross State Product



18

-50

-25

0

25

50

5

10

15

20

25

30

35

Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18

'000 advertisements Index

Internet Job Advertisements (LHS)

Business Confidence, rolling three month average(RHS)

LEADING INDICATORS OF LABOUR DEMANDWestern Australia


Around 50,000 jobs expected to be created over 2017-18 and 2018-19

Following decline of 17,000 over 2015-16 and 2016-17


19

800

900

1000

1100

1200

1300

1400

1500

1997-98 2001-02 2005-06 2009-10 2013-14 2017-18 2021-22

Forecast

'000 Persons

EMPLOYMENT LEVELSWestern Australia


CREATING JOBSLITHIUM DEMAND The State’s lithium industry is expanding in response to increases in

global lithium demand

20

Source: Pilbara Minerals & Roskill

217

777

1,009

1,634

0200400600800

1,0001,2001,4001,6001,800

GLOBAL LITHIUM DEMAND1,000 tonnes of LithiumCarbonate Equivalent

Forecast

2017 2026

low base high


CREATING JOBSOPPORTUNITIES FROM CHINA Growth in Chinese household income provides significant opportunities

for the WA economy

21

Source: CEIC & ABS cat no: 3401

0

200

400

600

800

1,000

1,200

1,400

1,600

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Mar-03 Mar-08 Mar-13 Mar-18

Annual sum 000sAnnual sum ($A)

CHINESE HOUSEHOLDEconomic Opportunities

Disposable income, per capita, urban (LHS)

Short term arrivals from China to Australia(RHS)


To facilitate more balanced and diversified growth in the economy and create local jobs, the Government has: allocated $425m over five years to tourism destination marketing and

events launched WA Industry Link to help local businesses secure work on

government contracts provided $4.9m to Defence West to champion WA’s defence industry provided $3.4m to expand the State’s STEM strategy removed the resource industry’s exemption from the BCITF levy, with

the additional revenue (~$25m) to help boost apprenticeships and create jobs

CREATING JOBS & STRENGTHENING THE ECONOMY

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CREATING JOBSMETRONET

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Additional investment of $750m over forward estimates for METRONET projects under development, including Morley-Ellenbrook Line, funded by: $729m from Commonwealth $21m from MRIF

Brings total METRONET investment over forward estimates to $2.2b (on top of $1.4b for FAL project), with no adverse impact on net debt

$1.6b to procure 246 railcars over next 10 years Seeking at least 50% local content Creating local jobs


CREATING JOBSSOCIAL & AFFORDABLE HOUSING & JOBS PACKAGE

24

Partnering with private sector to deliver $394m METRONET Social and Affordable Housing and Jobs Package 1,390 new homes, including up to 320 new social housing dwellings

and at least 400 affordable homes

8 high-density METRONET-oriented mixed-tenure developments expected to create over 2,350 jobs net debt neutral by end of forward estimates


DELIVERING QUALITY HEATH CARE, EDUCATION & COMMUNITY SERVICES

Recurrent spending of $30.5b in 2018-19 (up $277m or 0.9% on 2017-18)

$16.9b or 56% of this in health, education, and community safety

25

Communities$2,436m

8%

Health$8,808m

29%

Education$5,091m

17%

Electricity and Water Subsidies

$591m2%

Training$561m

2%

All Other$7,411m

24%Transport, Rail and

Roads$2,553m

8%

WA Police Force

$1,555m5%

Justice$1,472m

5%TOTAL

$30,478m

GENERAL GOVERNMENT EXPENSES2018-19


FIGHTING FOR A FAIR SHARE FOR WA

Over 2017-18 to 2021-22, WA will lose an estimated $16.7b compared to if we received our full population share of GST

We are: advocating for fundamental reform to the GST distribution system actively engaging in negotiations on key funding agreements (including

health, education, housing) securing additional Commonwealth infrastructure funding

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2018-19 WA population share of GST

47.3%

2021-22 WA population share of GST

64.9%

No other State’s population share has

ever been below 83.4%


CONCLUSION

Low expense growth is driving the return to surplus

The WA economy is turning the corner business and consumer confidence have returned

Seizing Western Australia’s unique opportunities

Major election commitments achieved with minimal impact on State debt

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western australia state budget 2018 -19 · western australia state budget 2018-19 improved...

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