2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections StatementConsistent with budget expectations, economic growth in the outyears is forecast to be4.25%, which is broadly in line with long-run average growth. Economic growth overthis period is expected to rebalance away from business investment towards exports, asthe construction phase of major resource projects is completed and productioncommences.Nevertheless, there remain risks to the State’s economic and financial outlook from theglobal economy. In particular, a softening of economic growth in China led to a sharpdecline in iron ore prices in the September 2012 quarter. While export volumes havebeen largely unaffected, a general fall in commodity prices since budget has beenaccompanied by a persistently high $US/$A exchange rate. This has resulted in asignificant downward revision to mining revenue of $605 million in 2012-13 and almost$3.2 billion over the four year forward estimates period. The divergence of movementsbetween iron ore prices and the exchange rate has resulted in amendments to theforecasting methodology as part of this mid-year review (see feature box inChapter 3: The Western Australian Economy).On the domestic front, the State’s strong population growth and high levels of businessinvestment are supporting firm demand for labour. Employment growth for 2011-12 wasa strong 3.7% and forecast employment growth for 2012-13 has been revised up to 3.25%(representing 6,339 additional jobs relative to the 2.75% at budget time). Reflecting this,payroll tax collections have been better than forecast at budget time, resulting in anupward revision of $216 million in 2012-13 and a total of $732 million over the fouryears to 2015-16.Transfer duty 1 collections have also been stronger than forecast at budget. This largelyreflects a number of large commercial property transactions, but underlying demand forhousing also appears to have improved, reflecting tight rental market conditions, anincrease in building approvals, and increasing first home buyer activity. As a result,forecast transfer duty revenue for 2012-13 has been revised up by $122 million.While the State’s population share of national GST revenue remains at a historical low of55% in 2012-13, forecast GST revenue has been revised up by $170 million in 2012-13.This is largely due to increased estimates of the State’s share of the national populationfollowing the 2011 Census. The decline in mining revenue noted above is also having alagged positive impact on forecast GST revenue in the outyears.However, Western Australia’s population share of GST revenue is still expected to fallsignificantly over the forward estimates period, to around 35% by 2015-16.Western Australia continues to lose $13.5 billion over the forward estimates relative to anequal per capita share.A softer revenue outlook for the electricity and water utilities, together with higheroperating costs, will drive lower profitability and hence lower payments to the generalgovernment sector (down $66 million in 2012-13 and $978 million over the four yearsto 2015-16).1Includes landholder duty.2
Financial ProjectionsOverall, total general government revenue over the budget period has been revised downby a total of $1,203 million since the 2012-13 Budget.In addition to the tighter revenue outlook, the State’s strong economic and populationgrowth is leading to increased demands for government services and infrastructure.These factors have underpinned major funding initiatives in this mid-year review,including:an additional $85 million in 2012-13 to meet higher than anticipated demand forhospital services, including an additional $20 million for elective surgery;additional funding of $55 million in 2012-13, and a further $267 million over theforward estimates, for the Department of Education to meet additional costsassociated with higher than forecast student enrolments;an additional $23 million in 2012-13 and a total of $43 million over the forwardestimates period to meet demand for training places;$410 million over the four years to 2015-16 for high priority transport infrastructureprojects including an extension of the Mitchell Freeway from Burns Beach Road toHester Avenue and works on local government roads;$80 million over the forward estimates period to build a train station with2,000 parking bays at Aubin Grove in Perth’s southern suburbs; andan additional $9 million in 2012-13 to meet higher than anticipated demand formental health inpatient services.To accommodate the downturn in revenue and these additional spending demands,the Government has implemented a range of new savings measures since the2012-13 Budget. A number of these measures were announced on 26 September 2012and further measures have been approved as part of this mid-year review. The totalimpact of these savings measures is to improve the operating balance in 2012-13 and2013-14 by $527 million and $84 million respectively (see feature box later in thischapter for detail on these measures).Overall, changes to the revenue and expense outlook since budget-time have resulted in areduction in the forecast general government operating balance in all years (with theexception of 2015-16), and an increase in total public sector net debt by 30 June 2016.The following table outlines the key budget aggregates.3
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2012-13 Government Mid-year Financial Projections Statement

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