- Surplus of $175million in 2014-15
New revenue and savings measures worth more than $400million next year and $2billion in forward estimates
Student enrolment and patient projections fully funded in education and health
Major new Royalties for Regions initiative
GST revenue headed towards 11 cents in the dollar
Treasurer Mike Nahan today announced increased spending of $188million and $447million for education and health respectively, while delivering a $175million surplus in the 2014-15 State Budget against a background of retreating State revenue.
Dr Nahan said the Government was responding to changing economic circumstances by introducing a range of targeted revenue and savings measures while still building on its achievements in infrastructure and service delivery over the past five years.
The $175million surplus comes at a time when State revenue is under stress from falling commodity prices, particularly for iron ore and a stubbornly high Australian dollar.
The Treasurer said the strong growth in the State's economy over the past 10 years would now return to more moderate rates, following a peak in business investment.
"We expect growth to soften to about 2.75 per cent in 2014-15 before picking up again to five per cent by 2017-18," he said.
But Dr Nahan said Western Australia was still the engine room of the nation's economy with about $150billion worth of projects committed to or under construction.
He said Treasury expected Gross State Product and employment to increase at a faster rate after the 2014-15 financial year.
"Make no mistake, we are still the envy of the rest of the country across a whole range of economic measurements," the Treasurer said.
At the same time as Western Australia's taxation revenue is softening, the State's GST grant has fallen to 37.6 per cent of its population share, down from 44.6 per cent in 2013-14.
"While this is a higher share in 2014-15 than we forecast at the time of the December Mid-Year Review, it nonetheless represents a record low in WA's GST share and will result in the State receiving $258million less in GST than it did in 2013-14," Dr Nahan said.
"There is no doubt the GST model is broken when our State is on a trajectory towards just 11 per cent return on its population share. Even the recent National Commission of Audit acknowledged that it requires reform. If we received our full population share, WA would get an extra $3.6billion in 2014-15."
The Treasurer said the State's reliance on volatile commodity prices was highlighted by falls in the iron price from highs of about $190 a tonne at its peak in 2011, to about $105 a tonne today.
"Our revenue from the GST has been replaced by iron ore royalties and this has seen us more reliant on a highly volatile source of revenue," he said.
Dr Nahan said despite the revenue squeeze, the Liberal National Government would deliver solid growth in the key portfolios of health, with the budget topping $8billion for the first time, and education ($188million in 2014-15, including a $10million transitional payment to accommodate the move to a new student-centred funding model in the 2015 school year).
"We have made sure that these two key service delivery areas are fully funded to cater for projections in patient numbers and student enrolments," he said.
The State Budget also features a new $600million Royalties for Regions Growing Our South plan which will give a major boost to projects and infrastructure in the South-West, Great Southern, Wheatbelt and Peel regions.
The Treasurer said the evolving economy and significant reduction in GST revenue provided a number of challenges and the Government had responded by introducing a raft of revenue and savings measures as part of its ongoing effort to return the State to a triple-A credit rating.
He said sales of surplus government land, including Health Department sites at Princess Margaret Hospital, Royal Perth Hospital, Shenton Park Rehabilitation Centre and Swan Districts Hospital were being considered as part of a broad divestment program to reduce debt.
"We are considering selling Kwinana Bulk Terminal and the Utah Point facility at Port Hedland Port, and some Water Corporation assets such as wastewater plants. We are also reviewing the State's continued ownership of the Perth Market Authority and the TAB," Dr Nahan said.
"The Government is undertaking a review of the electricity market and following that review and implementation of market reform, the Government will consider the sale of individual electricity generation assets, such as Muja."
State net debt is expected to be $24.9billion by June 30, 2015 and remain at a manageable level throughout the Budget period.
"The sale of assets that the State does not need to own is a key measure in regaining our triple-A credit rating and paying down debt," the Treasurer said.
He said key revenue and savings measures in this Budget will deliver an estimated $2billion in lower net debt by 2017-18, on top of $8.6billion in savings implemented over the last year.
These include:
a 15 per cent reduction in non-essential procurement expenditure across all general government agencies, saving $169million in 2014-15
interim dividend arrangements for the State's port authorities ($93million in 2014-15 and $116million over the forward estimates period)
removing the $36 car registration discount for private motorists ($43million in 2014-15 and a total $189million to 2017-18)
raising funds for the Perth Busport through a $365 increase for the Perth Parking Levy, phased in over two years. This equates to $1 a day ($10million in 2014-15 and $73million over the forward estimates)
five per cent Asset Investment Program efficiencies ($130million in 2014-15 and a total $478million to 2017-18)
providing a full exemption for first home buyers on transfer duty for homes valued up to $430,000, down from $500,000, which better represents the value of homes being bought by first home buyers ($54million in 2014-15 and a total $222million to 2017-18)
increased land tax rates by 10 per cent across the board ($72million in 2014-15 and $334million to 2017-18)
an increase in the landfill levy to deliver $10million in 2014-15 and $137million to 2017-18.
Dr Nahan said the Government was keen to shift support to first home buyers wanting to build a home and was doing so through the generous $10,000 First Home Owner Grant, leaving the transfer duty exemption unchanged for the purchase of vacant land.
The Treasurer said despite the new measures, the Liberal National Government would spend a further $23.7billion on State infrastructure over the next four years, adding to the $35billion in capital works the Government had spent since coming to power in 2008.
Household expenditure on Government fees and charges in WA would increase next year by about $324.18 from last year's figure for the 'representative' household taking the 'representative' basket of Government fees and charges to $5,224.53 for the full year.
But even after this increase and prior to other States releasing their 2014-15 Budgets, the representative household in Western Australia has the second lowest expenditure on State Government goods and services compared to other States and Territories.
"We have tried to keep prices for electricity, water and transport as low as possible. West Australians still enjoy the lowest levels of Government fees and charges for household essentials of any mainland State," Dr Nahan said.
"This year, the Government will subsidise electricity by about $400 per household, subsidise water by $2.5billion over four years and pay $9.32 towards two-zone fares for bus, train and ferry passengers."
The Treasurer said that even after the changes to WA's first home buyers transfer duty exemption, it was still very generous when compared to the other States and Territories.
The State Government's $10,000 First Home Owner Grant for new homes was not affected by the changes to the first home buyer transfer duty exemption, nor was the $3,000 grant for established homes.
"The changes to the first home buyer transfer duty exemption will encourage people to build a first home given that vacant land purchases of less than $300,000 are exempt from transfer duty for them," Dr Nahan said.
Fact File
Fiscal Action Plan announced in the 2013-14 Budget contained costs through CPI-based wages policy and voluntary and involuntary redundancies in the public sector
Revenue and savings measures announced in this Budget will boost the general government sector operating surplus by an estimated $446million in 2014 15 and save about $2billion in net debt terms to June 30, 2018, building on the existing Fiscal Action Plan
An extra 62,835 people came to live in WA last year
General government sector revenue is forecast to reach $28.7billion in 2014-15. Expenditure projected at $28.5billion
Royalties for Regions spending to be capped at $1billion a year
Treasurer's office - 6552 5700
