Treasurer Ben Wyatt has today provided State Parliament with a preliminary assessment of the impacts of the COVID-19 pandemic on the Western Australian economy and State’s finances.
The Economic and Fiscal Update was tabled along with the March Quarterly Financial Results Report, which outlined the State’s financial performance for the first nine-months of 2019-20, and largely reflects conditions prior to the COVID-19 pandemic.
The March quarterly report highlights the McGowan Government’s success in turning around the State’s finances, with the Budget in surplus and net debt around $9 billion lower than was projected by the previous Liberal National Government for 2019-20.
The separate Economic and Fiscal Update includes preliminary Treasury modelling, which indicates the economic shock from COVID-19 will be significant on the Western Australian economy.
Treasury baseline modelling projects that Western Australia’s Gross State Product will contract by 5.1 per cent in the June quarter 2020. This will reduce forecast growth to 0.7 per cent in 2019‑20, with a 3.1 per cent contraction expected in 2020-21, before returning to growth in 2021-22.
While royalty collections have remained relatively stable during the pandemic, significant downturns are forecast for other revenue sources including GST grants, payroll tax, transfer duty, land tax and vehicle licence duty.
Total general Government revenue over 2019-20 to 2020-21 is expected to be about $1.8 billion lower than outlined in the 2019-20 Mid-year Review.
The increase in expenditure to respond to COVID-19 combined with the reduction in revenues in the June quarter is expected to considerably reduce the forecast $2.6 billion operating surplus for 2019-20, which was anticipated in the Mid-Year Review.
The Treasurer told State Parliament today that forecasts should be treated with caution given the high level of uncertainty of the depth and duration of the ongoing effects of COVID-19 on the State, national and international economies.
As stated by Treasurer Ben Wyatt:
“There has never been any doubt that the impact of COVID-19 on the Western Australian economy and State finances would be severe.
“These preliminary forecasts highlight that our State is not immune to the global economic shock caused by COVID-19, despite our strong health response to the pandemic.
“Responsible financial management by the McGowan Government has put us in the best possible position to respond to the economic consequences of COVID-19.
“As a result, our Budget priorities will now be re-focussed on economic recovery.
“In the lead up to the State Budget in October, the McGowan Government will be solely focussed on growing the economy, and supporting WA businesses and jobs.
“To date the McGowan Government has committed $1.8 billion in support measures for households, small and medium businesses, community services and front-line service delivery agencies in response to the initial impacts of COVID-19.
“Our economic recovery plan, which includes three elements, is now underway.
“Restrictions will progressively be eased in accordance with expert health advice that will allow businesses to re-open and people to get back to work safely.
“Targeted investments have begun which aim to restore our economy to its growth trajectory as quickly as possible.
“In addition, reforms will be made to cut red tape, lift our growth potential and strengthen our economy.”