2007–08 ECONOMICANDFISCALOUTLOOK 2007–08 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 10 MAY 2007 Budget Paper No. 3 – Economic and Fiscal Outlook http://ourstatebudget.wa.gov.au BBP3_cov.inddP3_cov.indd 1 003/05/20073/05/2007 009:16:249:16:24 2007-08 Budget Paper set includes: Budget Paper No. 1 – Budget Speech Budget Paper No. 2 – Budget Statements (Volumes 1–3) Budget Paper No. 3 – Economic and Fiscal Outlook Budget Overview Reader’s Guide to the 2007–08 Budget Statements BBP3_cov.inddP3_cov.indd 2 003/05/20073/05/2007 009:16:349:16:34 2007–08 BUDGET ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 10 MAY 2007 2007–08 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 2007 John A. Strijk, Government Printer ISSN 1448–2630 2007-08 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS UNDER TREASURER’S CERTIFICATION i CHAPTER 1: ECONOMIC AND FISCAL OUTLOOK – OVERVIEW Fiscal Outlook .................................................................................................................... 1 Revenue Outlook.............................................................................................................. 3 Key Areas of Expenditure ................................................................................................ 4 Capital Works Program............................................................... ..................................... 6 Economic Outlook.......................................................................................................... ... 7 CHAPTER 2: FISCAL STRATEGY AND FINANCIAL PROJECTIONS Overview............................................................................................................................. 9 Fiscal Strategy .................................................................................................................. 10 Financial Targets........................................................................................................... 10 Summary of Financial Projections ............................................................................... 19 General Government Sector........................................................................................ 19 Summary.................................................................................................................................. 19 Operating Statement................................................................................................................ 20 Revenue ................................................................................................................................................ 24 Expenses ............................................................................................................................................... 26 Balance Sheet............................................................................................................................ 30 Cash Flow Statement................................................................................................................ 32 Total Public Sector........................................................................................................ 32 Summary.................................................................................................................................. 32 Capital Investment ................................................................................................................... 34 Net Debt ................................................................................................................................... 36 Issues in Public Sector Finances................................................................................... 40 The redistribution of the fiscal benefits of Western Australia’s resources boom within the Australian federation......................................................................... 40 Statement of Risks........................................................................................................... 46 Estimating Assumption............................................................................................... 46 Revenue Estimates ....................................................................................................... 46 Expenses ........................................................................................................................ 50 Capital Works ............................................................................................................... 51 Contingent Liabilities................................................................................................... 51 CHAPTER 3: GENERAL GOVERNMENT REVENUE Overview........................................................................................................................... 53 Taxation Relief Measures .............................................................................................. 57 Taxation Revenue Estimates.......................................................................................... 65 Commonwealth Grants .................................................................................................. 69 Other Revenue ................................................................................................................. 74 CHAPTER 4: GENERAL GOVERNMENT EXPENSES Overview........................................................................................................................... 79 Policy Decisions Affecting Expense (by Portfolio)................................................... 83 Summary........................................................................................................................ 83 Premier; Minister for Federal-State Relations; Trade; Innovation; Science; Public Sector Management ............................................... 85 Deputy Premier; Treasurer; Minister for State Development................................ 86 Minister for Agriculture and Food; Forestry; the Mid-West and Wheatbelt; Great Southern .................................................... 87 Minister for Local Government; Racing and Gaming; Multicultural Interests and Citizenship; Government Enterprises Minister Assisting the Minister for Planning and Infrastructure; Goldfields-Esperance; Youth ................................................................................ 88 Minister for Police and Emergency Services; Community Safety; Water Resources; Sport and Recreation........................... 89 Attorney General; Minister for Health; Electoral Affairs ....................................... 92 Minister for Employment Protection; Housing and Works; Indigenous Affairs; Heritage; Land Information................................................ 94 Minister for Planning and Infrastructure.................................................................. 97 Minister for Disability Services; Tourism; Culture and the Arts; Consumer Protection....................................................... 99 Minister for the Education and Training; South West .......................................... 100 Minister for Energy; Resources; Industry and Enterprise .................................... 101 Minister for Regional Development; Fisheries; the Kimberley, Pilbara and Gascoyne ............................................................... 103 Minister for Corrective Services; Small Business; Minister Assisting the Minister for Federal-State Relations............................ 104 Minister for the Environment; Climate Change; Peel ........................................... 106 Minister for Child Protection; Communities; Womens’s Interests; Seniors and Volunteering.................................................................... 108 CHAPTER 5: CAPITAL INVESTMENT Overview......................................................................................................................... 111 Cost and Demand Pressures ..................................................................................... 111 Major New Initiatives ................................................................................................ 112 Strategic Review ......................................................................................................... 113 Capital Spending Aggregates ................................................................................... 113 Capital Works Program ................................................................................................ 114 Capital Works Policy Decisions................................................................................ 117 CHAPTER 6: THE WESTERN AUSTRALIAN ECONOMY Overview......................................................................................................................... 133 State Final Demand....................................................................................................... 138 Household Consumption.......................................................................................... 138 Business Investment..................................................................................................