The WA Budget Annual Report for 2015/16 is out:
Western Australia experienced the second year of a substantial revenue ‘shock’ in 2015-16. In total, general government revenue declined by 3.3% or $915 million in 2015-16, the largest year-on-year reduction since accrual accounting and financial reporting were introduced in 1993-94. This follows a 2% contraction in general government revenue in 2014-15. The major contributions to the decline in revenue in 2015-16 were royalty income, GST grants and North West Shelf grants, which together declined by $1.1 billion (or 14.4%) relative to 2014-15.
• Royalty income declined by $477 million (or 10.4%) in 2015-16, mainly driven by lower iron ore royalties (down $423 million). The iron ore price continued to weaken in 2015-16, falling from an average of $US71.1 per tonne in 2014-15 to $US50.9 per tonne in 2015-16.
• GST grants declined by $377 million (or 16.7%) in 2015-16, with the State’s GST ‘relativity’ falling from 37.6% in 2014-15 to just 30% in 2015-16. − The Commonwealth Government again acknowledged Western Australia’s low share of GST revenue, providing an additional $490 million in funding for the Forrestfield-Airport Link project in 2015-16. This grant was equivalent to the additional funding Western Australia would have received if the State’s 2016-17 GST relativity had been maintained at its 2014-15 level.
• North West Shelf grants declined by $249 million (or 28.7%) in 2015-16, due largely to a lower oil price, which averaged $US43.4 per barrel in 2015-16, down from an average of $US73.5 per barrel in 2014-15. Taxation revenue grew by a modest 2.1% in 2015-16 (an increase of $187 million), largely due to increased land tax collections (up $204 million, reflecting an increase in land tax rates announced in the 2015-16 Budget), and a significant increase in landholder duty (up $318 million), due to a number of unusually large commercial property transactions.
• These increases were partly offset by a decline in payroll tax collections (down $100 million or 2.8%), the first decline in payroll tax collections in over two decades. Transfer duty receipts were also lower (down $261 million or 16.3%), driven by continued softness in the residential housing market.
General government expenses grew by just 2.4% (or $675 million) in 2015-16. This is well below the 7.7% average of the previous decade and is 0.1 percentage points lower than the estimated outturn included in the 2016-17 Budget (of 2.5%). Of note, recurrent expenditure by WA Health increased by 4.6% in 2015-16, a significant reduction on the 8.4% growth recorded in 2014-15 and the lowest outcome in over a decade. Growth in salaries costs was limited to 2.6% in 2015-16 (down from 3.8% in 2014-15), the lowest growth in 17 years.
This reflects the impact of measures implemented during the year to improve the efficiency of the public sector workforce, including the recruitment freeze announced in the 2015-16 Mid-year Review and voluntary separation programs in a number of agencies (including WA Health), as well as the impact of previous measures, including the workforce renewal policy. Despite the limited growth in spending, the severity of the downturn in the State’s revenue resulted in an operating deficit in 2015-16. The general government sector recorded a deficit of $2 billion for the year, in line with the estimated outturn in the May 2016 Budget but $688 million lower than the original 2015-16 Budget projection.
This follows a general government operating deficit of $431 million in 2014-15. At $5.2 billion, the Asset Investment Program (AIP) in 2015-16 was consistent with the estimated outturn in the 2016-17 Budget, with 80% of the State Government’s infrastructure spending in 2015-16 going to transport (30%), energy and water (29%), health (8%), education (6%) and housing (6%). Total public sector net debt stood at $27.3 billion at 30 June 2016, an increase of $4 billion since 30 June 2015, but $513 million lower than the estimated outturn (of $27.9 billion) in the 2016-17 Budget. The following table summarises the key financial outcomes for 2015-16.
From Flufferfax:
Treasurer Mike Nahan said the deficit was unavoidable in the face of lower iron ore royalty income, GST grants and North West Shelf grants due to low oil prices.
But it had been curbed thanks to efficiency measures in the public sector, including a temporary hiring freeze and voluntary redundancies.
The focus had been on shielding households and businesses from the revenue collapse, he said.
So, he ran huge deficits during the boom and has cut savagely into the bust and that is “shielding households and business from the revenue collapse”. Some excellent Institute of Public Affairs logic there.
The main thing the people of WA need to be shielded from is this Orwellian nincompoop.
