The Western Australian Treasury has slashed more than $2 billion from the state’s revenue forecasts amid falling iron ore prices, which are reducing mining royalties. From The West:
WA Treasury has cut more than $2 billion from State revenue forecasts since February’s pre- election financial update.
The writedown over four years to 2016-17 is mostly from revised official State iron ore price and royalty forecasts [down $1.5 billion] and a smaller-than-expected national GST take.
Treasury is also worried about a WA labour market that has deteriorated quicker than expected, which could mean lower payroll tax receipts.
This will further imperil a planned but slim $241 million Budget surplus for 2012-13 and the Government’s promise to always deliver surpluses…
“Therefore we’re having to ensure that we take every measure to deliver a surplus result”…
As the nation’s most mining-intensive state, the Western Australian Government has the most to lose from a disorderly unwinding of the mining boom, both via both lower commodity prices, which reduces mining royalties, as well as through a sharp fall in mining-related capital expenditure, which would reduce employment and payroll tax receipts. Western Australia’s stamp duty receipts could also get squeezed to the extent that any mining-related downturn reduces property-related turnover and prices.
While the fall in tax revenues is unfortunate (although not unexpected), what is more concerning is the Government’s rhetoric that it would “always deliver surpluses” and “ensure that we take every measure to deliver a surplus result”. Continually cutting expenditure in the face of falling taxation revenues and rising unemployment risks making any post mining boom adjustment even worse for Western Australia, exacerbating any downturn.
