2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections StatementTotal Public Sector 6SummaryOperating deficits for the total public sector are forecast in 2012-13 and 2013-14, before areturn to surplus outcomes for the remainder of the forward estimates period.These outcomes reflect the weaker general government sector revenue outlook discussedearlier, and weaker profitability (from lower forecast customer revenue and higheroperating costs) in the public non-financial corporations (PNFC) sector.Infrastructure spending has been revised up across the forward estimates period by a totalof $1.0 billion since budget, with a total spend of $27.4 billion projected for the four yearsto 2015-16. The Asset Investment Program remains at record levels, reflecting investmentin key social and economic projects across the State to support economic and populationgrowth.Reflecting the magnitude of the Asset Investment Program, total public sector net debt isforecast to rise to $24.8 billion by 30 June 2016.Operating StatementAn operating deficit of $541 million is forecast for the total public sector in 2012-13,compared to the $63 million surplus expected at the time of the budget. This turnaroundreflects movements in the general government operating position discussed earlier, alongwith a decline in the surpluses forecast for the PNFC and public financialcorporations (PFC) sectors.Public Non-Financial CorporationsThe outlook for the operating balance of the PNFC sector has deteriorated since the2012-13 Budget. The forecast is now for an operating surplus in 2012-13 of $39 million,a downward revision of $442 million on the budget-time projection. Across the outyears,projected surplus outcomes have been reduced by a total of $1.5 billion.The weaker operating outlook largely reflects the impact of lower customer revenue forGovernment Trading Enterprises (GTEs) mainly as a result of lower demand and lowerreturns on assets, particularly for the electricity and water utilities. Partly offsetting thesechanges, a new Port Access Fee (commencing in April 2013) will increase profitability ofthe Port Hedland Port Authority. The new charge will fund future infrastructure spendingthat will enhance the function of the port.6Also known as the whole-of-government, the total public sector consolidates the general government sector (discussed earlier inthis chapter), the public non-financial corporations sector (which includes entities operating on a predominantly cost recoverybasis like the State’s ports, and the electricity and water utilities), and the public financial corporations sector (which includesagencies such as the Western Australian Treasury Corporation and the Insurance Commission of Western Australia).22
Financial ProjectionsThe surplus outcomes forecast for the outyears are in part due to the Government’scumulative efficiency dividend imposed on the discretionary operating expenditure ofGTEs as part of the 2012-13 Budget. The efficiency dividend commences at 2.5% in2012-13, increasing to 6.0% by 2015-16 (with port authorities subject to a 1.5% dividendin 2012-13, increasing to 6.0% by 2015-16). This measure aims to strengthen theprofitability of the GTEs and increase the return to the community through higherdividends and tax equivalent revenue to the general government sector, particularly in theoutyears.The 2012-13 Budget estimated that the GTE efficiency dividend across the forwardestimates period would total around $384 million in net debt terms. Of this amount:the Western Australian Land Information Authority is still determining themechanism for its efficiency dividend of $23 million to deliver a benefit to the State’sfinances, given that under its regulatory framework the benefits flow tocustomers; andthe $56 million efficiency dividend from Western Power has been delivered through areduction in operating expenditure. However, the resulting financial benefits largelyflow to customers rather than State finances due to the regulatory framework thatWestern Power operates within.These agencies will continue to look for alternative measures in the lead up to the2013-14 Budget.The mid-year review incorporates an overall net $170 million payment in 2012-13 fromthe general government sector to support electricity entities. In round terms, thiscomprises $494 million of operating subsidies, partly offset by $324 million of taxequivalent and dividend revenue.This includes electricity tariff subsidies (which are made to offset the shortfall inelectricity prices paid by customers relative to the cost of providing electricity), alongwith various other initiatives such as pensioner and senior concessions, and the Feed-inTariff scheme.The net payment from the State’s water entities has been revised down since budget to$95 million, reflecting lower customer demand in response to water efficiency measures.Overall, the net payment from the general government sector to GTEs in 2012-13 is nowexpected to be $550 million, up $77 million on the budget-time forecast of $473 million.This higher net payment to the GTEs reflects the impact of lower profitability on taxequivalent and dividend payments to the general government sector (discussed earlier inthis chapter).23
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