Economic and Fiscal Outlook Aper No
Total Page:16
File Type:pdf, Size:1020Kb
2011-12 Budget Economic and Fiscal Outlook aper No. 3 Presented to the Legislative Assembly on 19 May 2011 2011-12 Budget Paper set includes: Budget Paper No. 1 Budget Speech Budget Paper No. 2Budget Statements (Volumes 1-2) Budget Paper No. 3 Economic and Fiscal Outlook Budget Overview Reader's Guide to the 2011-12 Budget Statements (Available electronically from http://ourstatebudget.wa.gov.au) 2011 -12 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 19 MAY 2011 2011-12 Economic and Fiscal Outlook © Government of Western Australia Excerpts from this publication may be reproduced, with appropriate acknowledgement, as permitted under the Copyright Act. For further information please contact: Department of Treasury 197 St Georges Terrace Perth WA 6000 Telephone: +61 8 9222 9222 Facsimile:+61 8 9222 9117 Website: http://ourstatebudget.wa.gov.au Published May 2011 John A. Strijk, Government Printer ISSN 1448-2630 2011-12 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS Page UNDER TREASURER'S CERTIFICATION CHAPTER 1: OVERVIEW 1 Economic and Revenue Outlook 2 Fiscal Outlook 4 Budget Objectives 6 Supporting Our Community 6 Building the State 8 CHAPTER 2: THE WESTERN AUSTRALIAN ECONOMY 11 Overview 11 Global Outlook 15 Household Sector 18 Household Spending 18 Housing Market 19 Business Investment 20 Government Sector 21 Government Consumption 21 Government Investment 22 International Trade 22 Exports 22 Imports 22 Labour Market 23 Employment 23 Unemployment and Participation 23 Wages 24 Prices 25 Consumer Prices Index 25 Risks to the Outlook 26 Global Risks 26 Domestic Risks 28 CHAPTER 3: FINANCIAL PROJECTIONS AND FISCAL STRATEGY 31 Overview 31 Summary of Financial Projections 33 General Government Sector 33 Summary 33 Operating Statement 34 Capital Investment 42 Balance Sheet 44 Cashflow Statement 45 Total Public Sector 45 Summary 45 Operating Statement 46 Capital Investment 48 Net Debt and Net Financial Liabilities 51 Fiscal Strategy 54 Financial Targets 54 Statement of Risks 61 Page CHAPTER 4: GENERAL GOVERNMENT REVENUE 69 Overview 69 2010-11 70 2011-12 71 2012-13 Onwards 73 Revenue Measures 74 Taxation Revenue Estimates 75 Commonwealth Grants 80 Royalty Income 89 Other Revenue 94 CHAPTER 5: GENERAL GOVERNMENT EXPENSES 103 Overview 103 Building the StateInvesting Now to Keep the Growth Going Into the Future 106 Major Expense Changes by Portfolio 107 Summary 107 Premier; Minister for State Development 109 Deputy Premier; Minister for Health; Tourism 113 Minister for Mines and Petroleum; Fisheries; Electoral Affairs 117 Minister for Regional Development; Lands; Minister Assisting the Minister for State 121 Treasurer; Attorney General 127 Minister for Education 132 Minister for Finance; Commerce; Small Business 134 Minister for Police; Emergency Services; Road Safety 137 Minister for Sport and Recreation; Racing and Gaming 139 Minister for Planning; Culture and the Arts; Science and Innovation 141 Minister for Energy; Training and Workforce Development; Indigenous Affairs 145 Minister for Transport; Housing 148 Minister for Child Protection; Community Services; Seniors and Volunteering; Women's 153 Minister for Local Government; Heritage; Citizenship and Multicultural Interests 155 Minister for Agriculture and Food; Forestry; Corrective Services 157 Minister for Environment; Water 159 Minister for Mental Health; Disability Services 162 Provisions 164 CHAPTER 6: ASSET INVESTMENT 167 Overview 167 Major Infrastructure Spending Changes by Portfolio 172 Summary 172 Premier; Minister for State Development 173 Deputy Premier; Minister for Health; Tourism 174 Minister for Mines and Petroleum; Fisheries; Electoral Affairs 176 Minister for Regional Development; Lands; Minister Assisting the Minister for State 177 Treasurer; Attorney General 179 Minister for Education 180 Minister for Finance; Commerce; Small Business 181 Minister for Police; Emergency Services; Road Safety 183 Minister for Sport and Recreation; Racing and Gaming 185 Minister for Planning; Culture and the Arts; Science and Innovation 186 Minister for Energy; Training and Workforce Development; Indigenous Affairs 188 Minister for Transport; Housing 190 Minister for Child Protection; Community Services; Seniors and Volunteering; Women's 195 Minister for Local Government; Heritage; Citizenship and Multicultural Interests 196 Minister for Agriculture and Food; Forestry; Corrective Services 197 Minister for Environment; Water 199 Page CHAPTER 7: ROYALTIES FOR REGIONS 203 Overview 203 Key Initiatives 203 APPENDIX 1:DETAILED FINANCIAL PROJECTIONS 217 APPENDIX 2:GENERAL GOVERNMENT OPERATING REVENUE 247 APPENDIX 3:2010-11 GENERAL GOVERNMENT OPERATING REVENUE 251 APPENDIX 4:POLICY DECISIONS AFFECTING SPENDING 255 APPENDIX 5:THE TREASURER'S ADVANCE 259 APPENDIX 6:STATE GOVERNMENT SOCIAL CONCESSIONS EXPENDITURE STATEMENT 265 APPENDIX 7:ASSET INVESTMENT PROGRAM SUMMARY OF EXPENDITURE AND SOURCE OF FUNDS 275 APPENDIX 8:PUBLIC CORPORATIONS IMPACT ON GENERAL GOVERNMENT REVENUE AND EXPENSES 283 APPENDIX 9:TARIFFS, FEES AND CHARGES 297 Under Treasurer's Certification The Government Financial Projections Statement presented in this budget is based upon Government decisions I was aware of or that were made available to me by the Treasurer on or before the budget planning cut-off date of 20 April 2011 and which had a material effect on the Government's financial projections. It has been prepared in accordance with applicable Australian Accounting Standards and Government Finance Statistics principles, and is based on the economic assumptions outlined in Chapter 2: The Western Australian Economy. These assumptions were finalised on 20 April 2011. Timothy Marney UNDER TREASURER 19 May 2011 CHAPTER 1 Overview Overall, the Western Australian economy has recovered well from the global economic downturn, with growth of 4.5% forecast for 2011-12, following estimated growth of 4.0% in the current financial year. However, there is significant divergence in the performance of key sectors of the State's economy. Growing demand from emerging economies and soaring commodity prices are generating a substantial pipeline of investment activity in the resources sector and boosting the State's royalty revenue. At the same time, households are being cautious in their spending, and the housing market has been much weaker than expected, resulting in a substantial downward revision to property transfer duty revenue. In addition, the projected decline in Western Australia's share of national GST revenue over coming years, from 7.4% in 2011-12 to an unsustainable 3.5% by 2014-15, represents a major structural challenge in managing the State's finances.The State Government will continue to actively pursue a more equitable and sustainable GST sharing arrangement, including through the Review of the GST Distribution recently announced by the Prime Minister. Against this background, the 2011-12 State Budget: delivers major social infrastructure for future generations; targets spending to deliver high quality services for all Western Australians, including through the biggest ever injection of additional funding into the not-for-profit sector; invests in the Western Australian economy to sustain growth into the future; and provides increased accountability through disciplined financial management. Following an estimated operating surplusfor the general government sector of $784 million in 2010-11, this budget delivers an operating surplus of $442 million for the coming financial year. 1 2011-12 Economic and Fiscal Outlook Despite these surpluses on day-to-day or recurrent operations, and the new measures implemented in this budget that build on the Government's track record of strong financial management, net debt levels are projected to rise over the forward estimates period, from an estimated $13.4 billion at 30 June 2011 to $22.4 billion by 30 June 20151. This reflects that the State's total revenuefrom State taxes, mining royalties, GST revenue and other sourcesis not sufficient to meet the State's total expenditure requirements, including infrastructure investment for essential utilities such as power and water.The resulting cash shortfall must be funded by borrowings, which are used to invest in infrastructure that is essential for the State's continued growth. Importantly, the net debt levels projected in this budget are sustainable and affordable, and remain consistent with the State's triple-A credit rating. Economic and Revenue Outlook Western Australia's economy is expanding at a stable pace. Conditions in the resources sector are particularly strong, with robust demand from emerging economies and high commodity prices creating a substantial pipeline of investment activity. However, conditions in other sectors of the State's economy are more subdued. Households continue to display a heightened level of fiscal restraint, resulting in modest growth in discretionary spending. Activity in the established housing market has softened markedly, partly in response to higher interest rates and the withdrawal of Commonwealth stimulus measures. At the same time, the agricultural sector has been affected by extreme weather conditions, and a number of industries are being challenged by the high Australian dollar. Nevertheless, the overall outlook for growth is positive. Western Australia is in the midst of a major investment cycle, led by construction of the $43 billion Gorgon Liquefied Natural Gas (LNG) project and several iron ore developments in the Pilbara and Mid