The McGowan Labor Government has today released the 2019-20 Mid-year Review, with net debt expected to decline over the next four years – the only State in Australia with debt forecast to decline.
When the previous Liberal National Government left office, net debt was forecast to grow to $43.4 billion (adjusted for the impact of new accounting standards) by 2019-20 with no peak in sight. Under the McGowan Labor Government, net debt is expected to decline to $36.2 billion in 2019-20.
The lower net debt has delivered interest cost savings of more than $800 million over the first three years of the McGowan Labor Government, which rather than being wasted on interest payments can be redirected towards improving services to the benefit of all Western Australians.
The turnaround in net debt of more than $7 billion, in less than three years, means the McGowan Government has achieved with its financial management what the Liberal Party had only ever dreamed of doing by privatising Western Power.
At the last election, the Liberals promised to sell the quality, income-generating asset and use the $7-8 billion of the proceeds to pay down debt. Under WA Labor this has been achieved with prudent fiscal management and has kept Western Power in public hands.
A key driver of lower State debt has been the McGowan Government’s disciplined control of expenditure, which has averaged just 2.2 per cent over its first two years in Government and is forecast to average just 1.6 per cent over the next four years. This compares to the 6.4 per cent average expenditure growth of the previous Liberal National Government.
The net operating surplus for 2019-20 has been revised up to $2.6 billion in 2019-20 from $1.5 billion at the 2019-20 Budget. Further surpluses are anticipated out to 2022-23.
Operating surpluses are used to fund asset investment, pay down debt and provide a buffer against economic and revenue volatility.
Since the Budget, revenues have been revised up particularly in 2019-20 due to higher iron ore royalties given an elevated iron ore price, as well as the bringing forward of Commonwealth road funding. This has been partly offset by a downward revision to tax revenues, particularly from large commercial transactions.
The Commonwealth’s Mid-Year Economic and Fiscal Outlook (MYEFO) released on Monday showed that Western Australia’s GST grants and top-up payments have been revised down by $632 million over the next four years given a projected reduction in the size of the GST pool.
Given the timing of the MYEFO, the downward revision is not included in the Mid-year Review. The volatility in various revenue sources highlights the importance of running budget surpluses and maintaining control of expenditure.
Despite global and national economic headwinds, Treasury has forecast economic growth to accelerate to three per cent in 2019-20, underpinned by the domestic economy. Jobs growth is expected to gain pace, building on the 55,600 jobs created since the McGowan Government came to office.
The State’s improved financial position has given capacity to make targeted investments to support the economy, create jobs and deliver better services. Measures since the Budget have included:
- $169 million for the largest ever increase in the payroll tax exemption threshold;
- $282 million for a State-wide schools and hospital maintenance package;
- $29 million to provide a 75 per cent discount on stamp duty for off-the-plan multi-storey dwellings;
- Extension of the expanded eligibility criteria for Keystart for a further six months;
- $150 million for a social housing package and $72 million for a homelessness package;
- $51 million to reduce TAFE fees by 50 per cent for a range of courses with emerging skill shortages;
- $96 million (to 2025-26) for the Stage 2 development of the Joondalup Health Campus;
- $92 million to the community services sector to improve sector sustainability;
- $91.3 million to redevelop the Subiaco East precinct including Subiaco Oval and the old Princess Margaret Hospital site;
- $20.2 million for a 128-bed Alcohol and Other Drug facility for Casuarina prison;
- $55.7 million for five new primary schools in 2022; and
- $5 million for a police summer blitz across the State, particularly the Perth CBD.
Significant progress has been made on METRONET since the Budget, with forward works underway on the Thornlie Cockburn Line and Yanchep Rail Extension. The contract for the Bellevue railcar manufacturing facility has been signed with the combined estimated total cost of these three projects below the approved budget.
The 2019-20 Mid-year Review is available from the Department of Treasury’s website at https://www.treasury.wa.gov.au
As stated by Treasurer Ben Wyatt:
“The Mid-year Review shows the continued results of the McGowan Labor Government’s good financial management, with solid operating surpluses projected over the next four years. Running surpluses is an important first step in paying down the mountain of debt we inherited from the previous Liberal National Government, which will take many, many years.
“In contrast to the Barnett-Harvey Government, this Government has made the difficult decisions to repair the finances, a point consistently acknowledged by the ratings agencies, the media and industry groups, but the Opposition is still in denial about.
“The strong budget position will assist to protect against sudden changes in revenue, such as the significant decline in GST revenue or projected drop in iron ore prices revealed in the Federal Government’s mid-year budget update this week.
“I am pleased to see the Western Australian economy continues to build momentum. Since we came to office, 55,600 jobs have been created and economic growth is expected to accelerate to three per cent this year, despite global and national headwinds, with the McGowan Labor Government playing a lead role.
“Good financial management has allowed this Government to make targeted investments to support the economy, create jobs and deliver better services, such as payroll tax and stamp duty relief, the social housing and homelessness packages, and more.”