2013-14 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 8 AUGUST 2013 2013-14 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 Locked Bag 11 Cloisters Square WA 6850 Telephone: +61 8 6551 2777 Facsimile: +61 8 6551 2500 Email: [email protected] Website: http://ourstatebudget.wa.gov.au Published August 2013 John A. Strijk, Government Printer ISSN 1448–2630 2013-14 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS Page UNDER TREASURER’S CERTIFICATION ....................................................................... i C HAPTER 1: OVERVIEW ..................................................................................................... 1 Introduction ............................................................................................................................... 2 Feature Box: Fiscal Action Plan ................................................................................................. 3 Economic and Fiscal Outlook ................................................................................................... 6 Budget Objectives ...................................................................................................................... 10 Securing Our Economic Future .................................................................................................. 10 Feature Box: Housing Supply Package ....................................................................................... 11 The Efficient Delivery of Quality Services ................................................................................. 12 Protecting Our Community ......................................................................................................... 12 Investing in Infrastructure to Support Our Growing State........................................................... 14 CHAPTER 2: THE WESTERN AUSTRALIAN ECONOMY............................................ 15 Introduction ............................................................................................................................... 15 Global Outlook .......................................................................................................................... 18 Global Commodity Markets ........................................................................................................ 19 Household Sector ....................................................................................................................... 20 Household Spending .................................................................................................................... 20 Housing Demand ......................................................................................................................... 21 Business Investment .................................................................................................................. 22 Government Sector .................................................................................................................... 24 Government Consumption ........................................................................................................... 24 Government Investment .............................................................................................................. 24 International Trade ................................................................................................................... 25 Exports ........................................................................................................................................ 25 Feature Box: Transition from Construction to Production ......................................................... 26 Imports ........................................................................................................................................ 29 Labour Market .......................................................................................................................... 29 Employment ................................................................................................................................ 29 Unemployment and Participation ................................................................................................ 30 Population .................................................................................................................................... 31 Wages .......................................................................................................................................... 31 Prices .......................................................................................................................................... 32 Consumer Price Index ................................................................................................................. 32 Risks to the Outlook .................................................................................................................. 33 Global Risks ................................................................................................................................ 33 Domestic Risks ............................................................................................................................ 34 CHAPTER 3: FINANCIAL PROJECTIONS AND FISCAL STRATEGY ...................... 37 Introduction ............................................................................................................................... 38 Summary of Financial Projections ........................................................................................... 39 General Government Sector ........................................................................................................ 39 Summary ...................................................................................................................................... 39 Operating Statement .................................................................................................................... 41 Capital Investment ....................................................................................................................... 47 Balance Sheet .............................................................................................................................. 49 Cashflow Statement ..................................................................................................................... 50 Total Public Sector ...................................................................................................................... 50 Summary ...................................................................................................................................... 50 Operating Statement .................................................................................................................... 51 Capital Investment ....................................................................................................................... 52 Cashflow Statement ..................................................................................................................... 54 Net Debt ...................................................................................................................................... 54 Fiscal Strategy ............................................................................................................................ 56 Financial Targets ......................................................................................................................... 56 Statement of Risks ..................................................................................................................... 59 Feature Box: Long-term Financial Projections and the Fiscal Action Plan ............................... 74 CHAPTER 4: GENERAL GOVERNMENT REVENUE .................................................... 79 Introduction ............................................................................................................................... 80 2012-13 Estimated Actual ........................................................................................................... 81 2013-14 and Beyond ................................................................................................................... 81 Revenue Measures ..................................................................................................................... 85 Taxation Revenue ...................................................................................................................... 90 Commonwealth Grants ............................................................................................................. 95 Feature Box: Redistribution of Resources across States by the Commonwealth ........................ 100 Royalty Income .......................................................................................................................... 105 Feature Box: Iron Ore Price Forecasting Assumptions .............................................................. 108 Other Revenue ........................................................................................................................... 113 Feature Box: Tax and Royalty Expenditure Statement