WA State Budget 2020 Update

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Western Australia’s resources powerhouse delivers a $1.2 billion State Budget surplus

McGowan Government Treasurer Ben Wyatt this afternoon handed down the 2020-21 State Budget. It was dubbed, “one of the most important financial documents produced by a Western Australian Government since World War II”. It encompasses the McGowan Government’s COVID-19 recovery projects, which aims to enable a private sector-led economic rebuild for Western Australia (WA).

The delivery of today’s surplus bucks the trend of other governments around the nation, which have delivered – or will soon deliver – large deficits.

Royalties collected from the resources sector now make up almost a quarter of all revenue collected by the State Government, highlighting the growing importance of the sector to the WA economy. Given the significance of this performance, the sector will no doubt keep a close eye on the government’s State Climate Policy, due to be released in late 2020.

The funding of major initiatives, including the $5.5 billion WA Recovery Plan and the $27 billion Asset Investment Program, has caused the net debt forecast to increase by $3.8 billion over 2020-21 to $39.3 billion. It is forecast to continue to rise to a peak of $42.9 billion by 2022-23.


Economic outlook built on two COVID assumptions: no second wave and closed borders until June quarter 2021

The Budget is predicated on the assumption that there will be no second wave outbreak of COVID-19 in WA and no further outbreaks in other States, and that the State’s borders will remain closed until the June quarter of 2021.

$8,287 million of general government revenue is expected to flow in from the resources sector. This large contribution to the State’s finances is projected to decrease on the back of an expected fall in the iron ore price in 2021-22. 

The pandemic has resulted in a weaker economic outlook for WA with Gross State Product expected to grow by just 1.25% in 2020-21 – down from 2.5% forecast at the 2019-20 Mid-Year Review – and to remain well below the decade-average over the following three years. Real state final demand growth is projected to decrease – but will remain in the positive – to 0.5% in 2021-21, before growing to 3.75% in the following financial year.

Unemployment is expected to average out over the financial year at 8.0%, although the Treasurer noted in his speech today that following the finalisation of this assumption, unemployment has already fallen faster than expected, declining to 7% in August. Unemployment is projected to average 6.0% in the 2023-24 financial year.

Population growth is forecast to slow to 0.8% in 2020-21 and 0.7% in 2021-22, but is expected to lift over the forward estimates, forecast to reach 1.3% by 2023-24.

McGowan Government continues to focus on an infrastructure-led economic recovery

The centrepiece of this year’s State Budget is the $27 billion Asset Investment Program, which sets out the economic and social recovery program of work and a pipeline of job-creating projects over the next four years. This will be funded by successive budget surpluses, increased debt, and the Government’s continued Land Asset Sales Program. No other asset sales are flagged in the budget, however it notes the McGowan Government will consider the status of the TAB sale process in the second half of 2020-21.

The Asset Investment Program includes $7.5 billion of investment in regional infrastructure and the bringing forward of METRONET projects, including the Byford rail extension, level crossing removals on the inner Armadale line, and the redevelopment of Midland station. Road and rail projects will receive a total of $11.6 billion over the forward estimates as part of this program.

In addition, the WA Recovery Plan will significantly invest in new energy technologies to expand the State’s renewable hydrogen industry and generate opportunities in renewable technologies. More renewable energy and batteries are being installed on State-owned networks and assets, particularly in regional and remote communities. This $66.3 million will go towards innovative, clean energy projects.

Tackling crime and cost of living

The $665 million WA Household Electricity Credit is one of the major announcements coming out of this week’s State Budget. This will result in a one-off $600 credit on all Synergy and Horizon Power residential accounts, funded by the recent Bell Group settlement which will apply from November. 

In addition, electricity and water tariffs, motor vehicle related charges, and public transport fares remain frozen in 2020-21. 

The State Budget also includes $314 million to recruit an additional 800 police officers and for the rollout of major technological improvements including body worn cameras, personal issue mobile devices, Automatic Number Plate Recognition Technology, and protective vests to every frontline officer.

Opposition calls for more funding in diversification of WA economy

The Opposition criticised the budget surplus, saying more relief should be provided to small businesses and families who are struggling through the pandemic and with cost of living increases over previous years. 

Criticism was also levied at what was said to be a lack of investment to promote the diversification of WA’s economy. The Opposition was also critical over a claimed lack of funding to tackle ambulance ramping, hospital overcrowding, and a new women’s and children’s hospital.

The Opposition also echoed the Chamber of Commerce and Industry’s concerns that the budget missed the opportunity to incentivise the business community to power up the economy.

Looking forward to the State Election and the McGowan Government’s reform agenda

This pre-election budget is likely to assist the McGowan Government strong claims at re-election. With 156 days until polling day, the McGowan Government will be keen to spruik its COVID-19 recovery plans and its economic management credentials.

The State’s relatively strong financial position will give the government an opportunity to provide support in key areas to develop WA’s recovery and growth, including support for businesses and the not-for-profit and community support sectors.

With the resources sector doing much of the heavy lifting in boosting economic activity, the McGowan Government will need to balance its ongoing support for the industry with an eye towards diversification of the economy. Given the impact of COVID-19 on the tourism and education sectors, an increased focus on defence, agriculture and aquaculture industries offer an immediate opportunity.

This provides real opportunity for these sectors to engage with the McGowan Government and its key Ministers to help shape what the next four years of regulatory reform and policy outcomes in WA will look like.



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