STATE BUDGET 2018-19 Hon Ben Wyatt, MLA TREASURER 11 May 2018 - - PowerPoint PPT Presentation

11 May 2018

Hon Ben Wyatt, MLA TREASURER

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

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WESTERN AUSTRALIA STATE BUDGET 2018-19

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

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WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

THE GOVERNMENT’S PLAN IS WORKING

 Constrain expense growth

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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

WESTERN AUSTRALIA STATE BUDGET 2018-19

 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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WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

THE GOVERNMENT’S PLAN IS WORKING

 Low expense growth delivers cash surpluses

6

• 5
• 4
• 3
• 2
• 1

1 2 2001-02 2005-06 2009-10 2013-14 2017-18 2021-22

TOTAL PUBLIC SECTOR CASH SURPLUS/DEFICIT

$ Billion

Liberal-National Labor Forecast

WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

THE GOVERNMENT’S PLAN IS WORKING

 Cash surpluses pay down State debt

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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-National Labor Forecast

WESTERN AUSTRALIA STATE BUDGET 2018-19

 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 GROWTH

MORE EFFICIENT DELIVERY OF HEALTH SERVICES

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Cost gap 2016-17 20.2% Cost gap 2017-18 16.6% Cost gap 2021-22 13.6%

WESTERN AUSTRALIA STATE BUDGET 2018-19

 $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 GROWTH

EMBEDDED WITH HELP OF BUDGET REPAIR

 Budget repair measures from last year are in progress and on track

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WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

TURNAROUND SINCE 2017-18 BUDGET

 $2.8b improvement in net operating balance

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• 3,000
• 2,500
• 2,000
• 1,500
• 1,000
• 500

500 1,000 1,500 2,000 2017-18 2018-19 2019-20 2020-21 2021-22 2017-18 Budget 2018-19 Budget

IMPROVEMENT SINCE 2017-18 BUDGET General Government Net Operating Balance

$ Million

WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

TURNAROUND SINCE 2017-18 BUDGET

 $3.2b improvement in forecast level of net debt

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30 32 34 36 38 40 42 44 46 2017-18 2018-19 2019-20 2020-21 2021-22 2017-18 Budget 2018-19 Budget

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

$ Billion

WESTERN AUSTRALIA STATE BUDGET 2018-19

STATE FINANCES BACK ON TRACK

REVENUE GROWTH HAS STABILISED

 Revenue growth remains subdued

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 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.

1 2 3 4 5 6 2017-18 2018-19 2019-20 2020-21 2021-22

REVENUE GROWTH General Government Sector

Percent

Average growth = 3.5% p.a.

(a)

WESTERN AUSTRALIA STATE BUDGET 2018-19

RESPONSIBLE FINANCIAL MANAGEMENT

KEY 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 2021-22 Estimated Budget Forw ard Forw ard Forw ard Actual Estimate Estimate Estimate Estimate GENERAL GOVERNMENT SECTOR Net 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 SECTOR Net Debt at 30 June ($m) 35,951 39,103 40,853 40,413 39,745 Net Debt as a Share of GSP (%) 13.7 14.5 14.6 13.9 13.0 Asset Investment Program ($m) 5,522 6,248 5,449 4,945 4,872 Cash Surplus/Deficit ($m)

• 3,468
• 2,961
• 1,553

572 798

WESTERN AUSTRALIA STATE BUDGET 2018-19

RESPONSIBLE FINANCIAL MANAGEMENT

KEY 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 3.0 Exports (real growth) 5.5 7.5 3.5 2.5 4.0 2.5 Employment (growth) 2.25 1.5 2.0 2.75 1.5 1.5 Unemployment rate 5.75 5.75 5.5 5.5 5.25 5.25 Wage Price Index growth 1.5 1.75 2.75 2.25 2.75 3.25 CPI growth 1.0 1.5 2.0 2.0 2.25 2.5 Iron ore price (CFR) 68.3 61.9 60.8 68.1 63.2 63.2 WA 2018-19 Budget Commonwealth 2018-19 Budget

WESTERN AUSTRALIA STATE BUDGET 2018-19

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

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• 10
• 8
• 6
• 4
• 2

2 4 6 8 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Balancing Item Dwelling Investment Government Spending Business Investment Household Consumption Net Exports Gross State Product Percentage Points

GROSS STATE PRODUCT Contributions to Growth

Forecast

WESTERN AUSTRALIA STATE BUDGET 2018-19

WA ECONOMY HAS TURNED THE CORNER

 Domestic economic activity is approaching its trough

16

• 10
• 5

5 10 15 20 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21 Forecast Percent

DOMESTIC ECONOMIC GROWTH State Final Demand

WESTERN AUSTRALIA STATE BUDGET 2018-19

WA ECONOMY HAS TURNED THE CORNER

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

17

• 4
• 2

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

WESTERN AUSTRALIA STATE BUDGET 2018-19

WA ECONOMY HAS TURNED THE CORNER

18

• 50
• 25

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 DEMAND Western Australia

WESTERN AUSTRALIA STATE BUDGET 2018-19

 Around 50,000 jobs

expected to be created

• ver 2017-18 and

2018-19

 Following decline of

17,000 over 2015-16 and 2016-17

WA ECONOMY HAS TURNED THE CORNER

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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 LEVELS Western Australia

WESTERN AUSTRALIA STATE BUDGET 2018-19

CREATING JOBS

LITHIUM DEMAND

 The State’s lithium industry is expanding in response to increases in

global lithium demand

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Source: Pilbara Minerals & Roskill

217 777 1,009 1,634 200 400 600 800 1,000 1,200 1,400 1,600 1,800

GLOBAL LITHIUM DEMAND

1,000 tonnes of Lithium Carbonate Equivalent Forecast 2017 2026 low base high

WESTERN AUSTRALIA STATE BUDGET 2018-19

CREATING JOBS

OPPORTUNITIES FROM CHINA

 Growth in Chinese household income provides significant opportunities

for the WA economy

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Source: CEIC & ABS cat no: 3401

200 400 600 800 1,000 1,200 1,400 1,600 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 000s Annual sum ($A)

CHINESE HOUSEHOLD Economic Opportunities

Disposable income, per capita, urban (LHS) Short term arrivals from China to Australia (RHS)

WESTERN AUSTRALIA STATE BUDGET 2018-19

 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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WESTERN AUSTRALIA STATE BUDGET 2018-19

CREATING JOBS

METRONET

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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

WESTERN AUSTRALIA STATE BUDGET 2018-19

CREATING JOBS

SOCIAL & AFFORDABLE HOUSING & JOBS PACKAGE

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 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

WESTERN AUSTRALIA STATE BUDGET 2018-19

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

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Communities $2,436m 8% Health $8,808m 29% Education $5,091m 17% Electricity and Water Subsidies $591m 2% Training $561m 2% All Other $7,411m 24% Transport, Rail and Roads $2,553m 8% WA Police Force $1,555m 5% Justice $1,472m 5% TOTAL $30,478m

GENERAL GOVERNMENT EXPENSES 2018-19

WESTERN AUSTRALIA STATE BUDGET 2018-19

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%

WESTERN AUSTRALIA STATE BUDGET 2018-19

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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