Forecasting September 7: What to expect from WA’s State Budget

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The Western Australian State Budget is due to be handed down on Thursday 7 September 2017 at 2pm.

As the first budget of the McGowan Government, and given the State’s financial woes, it is expected to be tough. The Premier and Treasurer have been warning us of this for months. So, let’s take look at what could be revealed in September.

The budget will likely contain a rationalisation of government services and delays and, rescoping or cancellations of current projects -  making way for the funding of election commitments and potentially some budget repair.

Jobs and the economy were the McGowan team’s mantra during the election and this budget will need to demonstrate how the new Government will deliver job growth and strengthen the economy over the next few years. The budget ultimately continues to be heavily influenced by iron ore prices and GST returns.

The GST issue is showing no sign of resolution in the near term and this leaves Premier McGowan and the Treasurer with a challenging budget for the remaining three and a half years of the current term. The community expects a very high standard of government services and continued infrastructure investment. Managing this expectation while repairing the budget is a difficult balancing act and this budget must deliver.

Election promises regarding non-privatisation of Western Power and Fremantle Ports, stopping Roe 8 and starting Metronet will also provide additional challenges to the Treasurer.  There are many in the finance world hoping the Government will elect to sell other, less politically charged, assets however the options are significantly reduced.

The Western Australian economy is currently giving mixed signals, with payroll tax down $200 million for the nine months to March 2017; iron ore prices have held up with an average of USD $70 for the same period (up from USD $49.50 last year) and growth in retail trade continues to be slow.
General government expenditure growth of 3.8 percent for the nine months to March 2017 is well below the decade average of 7.4 percent and is something on which the McGowan Government must maintain discipline.

We hope that the tough state budget won’t dampen some of the “green shoots” sprouting in the WA economy. Mining companies are again reporting a shortage of suitable applicants for jobs, especially those for trades and upper mine management. Salary packages are starting to rise as mining companies are again having to lure personnel back to West Australia from the east coast or from overseas.  
According to Seek, Western Australia saw average advertised salaries increase faster than the national average over the past financial year, mirroring a strong rebound in commodity prices over the same period.

The National Party and others in regional Western Australia will be closely watching the new funding arrangements for the Royalties for Regions program. After Minister for Regional Development, Alannah MacTiernan, referred to the first eight years of Royalties for Regions as the “petunia phase”, changes in which projects are funded and whether funding is re-directed to more recurrent expenditure items, will no doubt affect many of those interested in the regional areas.


By Associate Director Jamie Henderson and Special Counsel William Witham 

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