WESTERN AUSTRALIA STATE BUDGET 2019-20 BUDGET PAPER NO. 3 Economic and Fiscal Outlook 2019-20 Budget Paper set includes: Budget Paper No. 1 – Treasurer’s Speech Budget Paper No. 2 – Budget Statements (Volumes 1–2) Budget Paper No. 3 – Economic and Fiscal Outlook Reader’s Guide to the 2019-20 Budget Statements (available from www.ourstatebudget.wa.gov.au) 2019-20 B U D G E T ECONOMIC AND FISCAL OUTLOOK Budget Paper No. 3 PRESENTED TO THE LEGISLATIVE ASSEMBLY ON 9 MAY 2019 2019-20 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: www.ourstatebudget.wa.gov.au Published May 2019 Kevin J. McRae, Government Printer ISSN 1448–2630 2019-20 BUDGET ECONOMIC AND FISCAL OUTLOOK TABLE OF CONTENTS Page UNDER TREASURER’S CERTIFICATION ................................................................. i CHAPTER 1: OVERVIEW ............................................................................................ 1 Economic and Fiscal Outlook .................................................................................... 2 Feature Box: General Government Operating Surplus ............................................ 3 Budget Objectives ....................................................................................................... 5 Creating Jobs and Strengthening the State’s Economy ........................................... 5 Delivering Quality Health Care, Education and Community Services ...................... 6 Shaping our State, Investing in our Suburbs and Towns ......................................... 7 CHAPTER 2: ECONOMIC OUTLOOK ........................................................................ 9 Western Australia ........................................................................................................ 9 Gross State Product ................................................................................................... 9 Feature Box: Implementation of the Independent Review of Revenue Forecasting 17 Global Outlook ............................................................................................................ 18 Advanced Economies ............................................................................................... 18 China ......................................................................................................................... 19 Other Emerging Markets ........................................................................................... 20 Global Risks .............................................................................................................. 20 Commodity Markets .................................................................................................. 21 Feature Box: Iron Ore Price Uncertainty .................................................................. 23 CHAPTER 3: FISCAL OUTLOOK AND STRATEGY .................................................. 29 Fiscal Outlook ............................................................................................................. 30 General Government Sector ..................................................................................... 30 Summary .................................................................................................................. 30 Feature Box: Changes to Australian Accounting Standards .................................... 31 Operating Statement ................................................................................................ 35 Balance Sheet .......................................................................................................... 41 Cashflow Statement ................................................................................................. 42 Total Public Sector ..................................................................................................... 43 Operating Statement ................................................................................................ 43 Capital Investment ..................................................................................................... 46 Balance Sheet .......................................................................................................... 48 Cashflow Statement ................................................................................................. 48 Net Debt ..................................................................................................................... 48 Government Financial Strategy Statement ............................................................... 52 Financial Targets ....................................................................................................... 52 Statement of Risks ....................................................................................................... 59 Forecasting Uncertainties .......................................................................................... 59 Implementation of New Accounting Standards .......................................................... 59 Revenue Estimates .................................................................................................... 59 Spending Risks .......................................................................................................... 63 CHAPTER 4: GENERAL GOVERNMENT REVENUE ................................................ 67 Introduction .................................................................................................................. 68 Revenue Measures ...................................................................................................... 70 Taxation Revenue ........................................................................................................ 71 Summary .................................................................................................................... 71 Detail .......................................................................................................................... 71 Commonwealth Grants ................................................................................................ 75 GST Revenue ........................................................................................................... 76 Forecast of GST Shares ............................................................................................ 77 GST Distribution Reform ............................................................................................ 79 Commonwealth Grants Commission Methodology Review ...................................... 80 North West Shelf Grants ........................................................................................... 80 Tied Grants ............................................................................................................... 81 Royalty Income ............................................................................................................ 83 Summary .................................................................................................................... 83 Iron Ore Royalty Income ............................................................................................ 84 Other Royalty Income ................................................................................................ 85 Other Revenue.............................................................................................................. 86 Sales of Goods and Services .................................................................................... 86 Interest Income .......................................................................................................... 86 Revenue from Public Corporations ............................................................................ 87 Other Income ............................................................................................................. 87 CHAPTER 5: GENERAL GOVERNMENT EXPENSES .............................................. 89 Introduction .................................................................................................................. 90 A Strong Economy ..................................................................................................... 90 Delivering Quality Health Care and Education .......................................................... 91 Feature Box: Delivering Quality and Sustainable Health Care in Western Australia ..................................................................................................... 91 Community Safety ...................................................................................................... 93 Major Expense Changes ............................................................................................ 95 Summary .................................................................................................................... 95 Parliament .................................................................................................................. 96 Government Administration ...................................................................................... 97 Financial Administration ...........................................................................................