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2017-18 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 7 SEPTEMBER 2017 2017-18 Economic and Fiscal Outlook (Budget Paper No.3) © Government of Western Australia Excerpts from this publication may be reproduced, with appropriate acknowledgement, as permitted under the Copyright Act 1968. For further information please contact: Department of Treasury Locked Bag 11 Cloisters Square WA 6850 Telephone: +61 8 6551 2777 Facsimile: +61 8 6551 2500 Email: [email protected] Website: http://www.ourstatebudget.wa.gov.au Published September 2017 Kevin J. McRae, Government Printer ISSN 1448–2630 2017-18 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS Page UNDER TREASURER’S CERTIFICATION ................................................................. i CHAPTER 1: OVERVIEW ............................................................................................ 1 Economic and Fiscal Outlook .................................................................................... 1 Feature Box: Budget Repair ....................................................................................... 4 Budget Objectives ....................................................................................................... 9 Sustainable Finances: Responsible Financial Management and Better Service Delivery ................................................................................................................... 9 Future Jobs and Skills: Grow and Diversify the Economy, Create Jobs and Support Skills Development .................................................................................... 10 Strong Communities: Safer Communities and Support for Families ......................... 11 Better Places: A Quality Environment with Liveable and Affordable Communities ... 12 CHAPTER 2: ECONOMIC OUTLOOK ........................................................................ 15 Western Australia ........................................................................................................ 15 Gross State Product ................................................................................................... 15 Global Outlook and Risks .......................................................................................... 25 Advanced Economies ............................................................................................... 25 China ......................................................................................................................... 26 Other Emerging Markets ........................................................................................... 27 Global Risks .............................................................................................................. 27 Commodity Markets .................................................................................................. 28 CHAPTER 3: FISCAL OUTLOOK AND STRATEGY .................................................. 33 Fiscal Outlook ............................................................................................................. 33 General Government Sector ..................................................................................... 33 Summary .................................................................................................................. 33 Operating Statement ................................................................................................ 36 Balance Sheet .......................................................................................................... 42 Cashflow Statement ................................................................................................. 43 Total Public Sector ..................................................................................................... 44 Summary .................................................................................................................. 44 Operating Statement ................................................................................................ 45 Capital Investment ..................................................................................................... 48 Cashflow Statement ................................................................................................. 50 Net Debt ..................................................................................................................... 51 Government Financial Strategy Statement ............................................................... 54 Financial Targets ....................................................................................................... 54 Statement of Risks ....................................................................................................... 62 Forecasting Uncertainties .......................................................................................... 62 Revenue Estimates .................................................................................................... 62 Spending Risks .......................................................................................................... 66 CHAPTER 4: GENERAL GOVERNMENT REVENUE ................................................ 71 Introduction .................................................................................................................. 72 Feature Box: Revenue Volatility .................................................................................. 74 Revenue Measures ...................................................................................................... 77 Payroll Tax ................................................................................................................. 78 Taxes on Property ...................................................................................................... 79 Taxes on Gambling .................................................................................................... 79 Royalty Income .......................................................................................................... 80 Public Corporations .................................................................................................... 80 Taxation Revenue ........................................................................................................ 81 Summary .................................................................................................................... 81 Detail .......................................................................................................................... 81 Commonwealth Grants ................................................................................................ 85 GST Revenue ............................................................................................................ 86 Forecast of GST Shares ............................................................................................ 88 Western Australia’s Contribution to the Australian Federation .................................. 89 Revised ABS Population Estimates ........................................................................... 89 Productivity Commission Inquiry into Horizontal Fiscal Equalisation ........................ 90 North West Shelf Grants ............................................................................................ 90 Tied Grants ................................................................................................................ 91 Royalty Income............................................................................................................. 93 Summary .................................................................................................................... 93 Iron Ore Royalty Income ............................................................................................ 94 Other Royalty Income ................................................................................................ 95 Other Revenue.............................................................................................................. 96 Sales of Goods and Services .................................................................................... 96 Interest Income .......................................................................................................... 97 Revenue from Public Corporations ............................................................................ 97 Other Income ............................................................................................................. 97 CHAPTER 5: GENERAL GOVERNMENT EXPENSES .............................................. 99 Introduction .................................................................................................................. 100 Sustainable Finances: Responsible Financial Management and Better Service Delivery .................................................................................................................... 100 Feature Box: Machinery of Government Changes and Service Priority Review ......... 101 Feature Box: Sustainable Health Review .................................................................... 102 Strong Communities: Safer Communities and Support for Families ......................... 103 Feature Box: Justice Pipeline Model ........................................................................... 103 Feature Box: Target 120 .............................................................................................