IRON-CLAD SET OF BOOKS

Article by Peter Law courtesy of the West Australian.

An iron ore export boom combined with a spending spree by West Australians living free of COVID restrictions propelled WA to a record-breaking $5.6 billion surplus last financial year — the second-largest booked by any State government in Australia.

Handing down the Budget, his first as Treasurer, yesterday, Mark McGowan predicted his Government’s fortunes would be the catalyst for other States to launch a campaign to unwind the GST deal which shields WA from iron ore price drops.

WA is now the only State projecting surpluses over the next four years, including $2.8b in 2021-22.

That’s in stark contrast to NSW and Victoria, who were already drowning in a sea of deficit and debt even before their extended shutdown.

Mr McGowan was unapologetic, saying his approach to keeping WA COVID-free through snap lockdowns and border closures had been vindicated.

“If you compare us with other States, I kid you not, they’ll be wildly angry and they’ll be wanting to undo the GST deal because they failed to budget properly, NSW failed to manage COVID and so they’ll want us to pay,” Mr McGowan said.

As he spoiled for a new crossborder battle, the Premier shirked from a brawl with unions by confirming the healthy set of books would spell an early end to the State wages policy, which has capped pay rises for 150,000 public sector workers at $1000 a year since 2017.

As first reported by The West Australian, a review of the policy slated for 2023 will instead start next week and by early 2022, the workforce — including teachers, bus drivers and nurses — will discover by how much their pay packets will grow.

While the wage hike will be negotiated with union bosses over the next two months, the Budget includes an estimate that public sector salaries will swell by $1b over the next three years to almost $17b in 2025.

The Budget’s economic forecast included no assumption about when WA would reopen to COVID-infected States and Mr McGowan suggested he shouldn’t have speculated in an interview with this newspaper that the border might not be lifted until sometime between February and April.

Last year’s $5.6b surplus smashed the previous WA record of $2.7b set by Eric Ripper in 2007 and fell a whisker short of the $5.7b recorded by NSW in 2016-17.

The State’s rude financial health in the second year of the pandemic was overwhelmingly thanks to $11.3b in iron ore mining royalties in 2020-21.

With West Australians returning home and closed borders keeping them here, an explosion in home and motor vehicle sales — as well as gambling — saw tax receipts surge 11.7 per cent to $10.1b.

Overall, revenue grew 25 per cent last year to $40b, including $3b from the carve-up of GST.

By comparison, expenses increased 13 per cent to $34b.

Mr McGowan was at pains to explain the surplus would be used to fund improved services and new infrastructure, headlined by a previously announced $1.9b investment in the health system.

There was also $750 million to tackle climate change, $750m for social housing and $400m towards land acquisition as part of the Westport project, while Water Corp keeps $1.4b to put towards a new desalination plant.

“This Budget will deliver for the future by using our success today to set up the State for the long term,” Mr McGowan said in his maiden speech as WA Treasurer.

Net debt, however, remains a problem for the future, rising to $36 billion by 2025.

Credit agency Moody’s said WA was “firing on all cylinders — fuelled by strong mining royalties and effective pandemic management” in stark contrast to other States in lockdown.

However, the praise came with a warning: “We consider the WA economy is rapidly approaching a peak cycle.”

Opposition Leader Mia Davies said the size of the surplus was “unconscionable” against the backdrop of WA’s overcrowded hospitals.

“They have underinvested for four and a half years and now it’s appalling that we see a $5.6b surplus recorded in the State Budget,” Ms Davies said.

Shadow treasurer Steve Thomas highlighted that the McGowan Government had benefited from unprecedented iron ore royalties and the GST fix but still expected net debt to continue rising in the Budget out years.