2 0 0 6–07 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 11 MAY 2006 2006–07 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 and Finance 197 St George’s Terrace Perth WA 6000 Telephone: +61 8 9222 9222 Facsimile: +61 8 9222 9117 Website: http://ourstatebudget.wa.gov.au Published May 2006 John A. Strijk, Government Printer ISSN 1448–2630 2006-07 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS UNDER TREASURER’S CERTIFICATION i CHAPTER 1: ECONOMIC AND FISCAL OUTLOOK – OVERVIEW 1 Fiscal Outlook .................................................................................................................... 1 Revenue Outlook.............................................................................................................. 3 Key Areas of Expenditure ................................................................................................ 3 Capital Works Program............................................................... ..................................... 5 Economic Outlook.......................................................................................................... ... 7 CHAPTER 2: FISCAL STRATEGY AND FINANCIAL PROJECTIONS 9 Overview............................................................................................................................. 9 Fiscal Strategy .................................................................................................................. 10 Financial Targets........................................................................................................... 10 Summary of Financial Projections ............................................................................... 17 General Government Sector........................................................................................ 17 Summary...................................................................................................................................17 Operating Statement.................................................................................................................19 Revenue ................................................................................................................................................ 23 Expenses ............................................................................................................................................... 25 Balance Sheet.............................................................................................................................28 Cash Flow Statement.................................................................................................................29 Total Public Sector........................................................................................................ 30 Summary...................................................................................................................................30 Public Non-Financial Corporations ..........................................................................................31 Public Financial Corporations...................................................................................................32 Capital Investment ....................................................................................................... 32 Net Debt......................................................................................................................... 37 Total Public Sector ....................................................................................................................38 General Government .................................................................................................................40 Public Non-Financial Corporations ..........................................................................................41 Public Financial Corporations...................................................................................................41 Issues in Public Sector Finances................................................................................... 42 Building on the Boom – Utilising the Surplus………..…………………………….42 Statement of Risks........................................................................................................... 48 Estimating Assumptions ........................................................................................... ..48 Revenue Estimates ..................................................................................................... ..48 Expenses ....................................................................................................................... .51 Capital Works .............................................................................................................. .52 Contingent Liabilities.................................................................................................. .53 CHAPTER 3: EXPENDITURE INITIATIVES 55 Overview.......................................................................................................................... .55 Initiatives Approved in the 2006-07 Budget. ............................................................. .56 Parliament ..................................................................................................................... 56 Premier; Minister for Public Sector Management; State Development; Federal Affairs ........................................................................................................ 57 Deputy Premier; Treasurer; Minister for Government Enterprises; Minister Assisting the Minister for Public Sector Management....................... 62 Minister for Agriculture and Food; Forestry; the Mid-West and Wheatbelt................................................................................. 65 Minister for Education and Training......................................................................... 68 Minister for Water Resources; Sport and Recreation .............................................. 72 Attorney General; Minister for Health; Electoral Affairs ....................................... 77 Minister for Housing and Works; Consumer Protection Heritage; Land Information ................................................................................... 87 Minister for Planning and Infrastructure.................................................................. 89 Minister for Indigenous Affairs; Tourism; Culture and the Arts .......................... 97 Minister for the Environment; Racing and Gaming.............................................. 102 Minister for Energy; Science and Innovation ......................................................... 105 Minister for Resources and Assisting the Minister for State Development; Employment Protection; Goldfields-Esperance and Great Southern ........... 108 Minister for Police and Emergency Services; Justice; Community Safety ......... 111 Minister for Local Government and Regional Development; Fisheries; The Kimberley, Pilbara and Gascoyne............................................. 114 Minister for Disability Services; Citizenship and Multicultural Interests; Women’s Interests; Minister Assisting the Minister for Federal Affairs ....... 116 Minister for Community Development; Seniors and Volunteering; Youth; Minister Assisting the Minister for Planning and Infrastructure ...... 117 Minister for Small Business; Peel and the South West; Minister Assisting the Minister for Education and Training .......................... 121 CHAPTER 4: FINANCIAL PROJECTIONS – REVENUE 123 Overview......................................................................................................................... 123 Operating Revenue Projections.................................................................................. 127 Summary ..................................................................................................................... 127 Revenue Measures ..................................................................................................... 132 Taxation Revenue Estimates..................................................................................... 141 Other Revenue ............................................................................................................ 145 CHAPTER 5: THE WESTERN AUSTRALIAN ECONOMY 153 Overview......................................................................................................................... 153 State Final Demand....................................................................................................... 156 Household Consumption.......................................................................................... 156 Business Investment................................................................................................... 157 Dwelling Investment.................................................................................................. 159 Public Activity ............................................................................................................ 160 Net Exports...................................................................................................................... 161 Exports ........................................................................................................................