This West Australian state budget resembles the caricature of the state’s most famous stereotype: the cashed-up, FIFO bogan.
A $5.6 billion surplus? Revenue growth of a completely mind-boggling 25 per cent in a single year? And in a global pandemic no less.
It’s easy to see why Mr McGowan became WA Treasurer on top of Premier. Credit:Trevor Collens
It defies precedent.
You can see why Mark McGowan wanted to take the treasury portfolio after the last election.
And you can also see why he is in absolutely no hurry to change a single policy setting around COVID or borders.
“Crushing” the virus, the Premier’s well-worn refrain, means keeping it out of the mining industry that has delivered windfall royalty revenues like nothing before seen.
High commodity prices have meant strong labour demand, which has also given the budget a payroll tax boost.
And locking West Australians into their own state means they are spending up big on new cars and houses, producing yet another river of cash via stamp and transfer duties.
A year ago state revenue was $32.1 billion, this year it was $40.2 billion. It is a staggering leap in a 12-month period and treasury predicts it will fall 5 per cent to $38.3 billion in 2021-22.
On the spending side, the budget grew an eye-watering 13 per cent, the largest single year increase in modern history, which you should keep in mind when you hear the Premier’s boasts about his prudent financial management.
This is now the highest-taxing government in West Australian history, collecting an extra $1.1 billion in tax (up 12 per cent) including vehicle licensing duty up 37 per cent and gambling taxes up 20 per cent (treasury notes that this surge is due to “enhanced Commonwealth income support measures” and expects it to fall).
But mining royalties are the real story. They increased, in a single year, by 43 per cent or $3.7 billion to $12.1 billion.
(Of course, Andrew Forrest took home $4 billion personally in dividends, so it pays to keep these things in perspective. Someone will pick up where Brendon Grylls left off one day soon.)
Mining royalties are 25 per cent of state revenue, a record high; royalties have sat between 10 and 20 per cent of revenue for most of the last 15 years.
It is why the cashed-up bogan metaphor feels so apt.
Mr McGowan said the surplus was a result of his government’s sound financial management but without the barnstorming iron ore price over 2020-21 the books wouldn’t have looked nearly as healthy.
In 2007 the cashed-up bogan was flying high, acquiring premium utes and jetskis. By 2015 the toys were on Gumtree as economic reality bit.
After the $40 billion bonanza, treasury projects revenue to fall 4.7 per cent and then 9 per cent over the next two years.
Spending, coming off the 13 per cent pandemic surge, is set to rise just 2.8 per cent and then be slashed an unprecedented 7.4 per cent.
In his budget speech, the Treasurer said he understood that recurrent spending could not be booked against volatile royalty revenue.
This has been treasury advice for a decade but it was ignored for the bulk of the Barnett years.
The challenge for the Treasurer will be in the delivery over the next 2-3 years.
Instead of jetskis and utes, Mr McGowan has set aside the windfall for a $1.8 billion maternity hospital, a $750 million climate action fund, a $750 million social housing investment fund, $500 million for IT upgrades and $400 million for land acquisitions around a new Cockburn Sound port.
And rather than ripping dividends out of the Water Corporation to fund spending, the utility will be allowed to retain $1.4 billion to build its next desalination plant, and the financial government corporations, the Insurance Commission and Treasury Corp, will have their dividends applied to debt reduction.
The sting on the infrastructure side is that a range of politically prominent infrastructure projects – especially Metronet – have been further delayed.
Most Viewed in National
From our partners
Source: Read Full Article