Delivering the Western Australian Budget on 12 May 2016, the Treasurer, Mike Nahan, blamed the “mother of all revenue hits” for the largest state deficit in history.

He attributed the $3.9 billion deficit to the faltering economy and slump in iron ore prices, accompanied by the government’s long-held concerns about an inequitable distribution of GST revenue. State debt is forecast to reach $40 billion within three years.

Against this backdrop, new spending has been severely curtailed, with the government focused on securing the future through measures aimed at diversifying the economy and creating new jobs, while continuing to meet demand for essential services.

Proposed infrastructure initiatives, including the Infrastructure Fund, will be financed by recently completed asset sales, and topped up by the proposed Western Power and Horizon Power Pilbara transmission and distribution assets sale, (to be put to voters at the Federal Election).

Business is likely to be well-disposed to the asset sales, however falling investment levels and rising unemployment will make it more difficult for Western Australia to plan for a more prosperous future, at least in the near term.

Headline Budget items

  • Economic growth is expected to increase from 1% in 2015-16 to 1.25% in 2016-17, with a forecasted increase in growth to 3% by 2019-20
  • Government revenue is expected to decline for the third consecutive year by 3.1% to $25.7 billion in 2016-17
  • Western Australia’s share of the GST is expected to increase slightly from 30% of Western Australia’s population share to 30.3%, which equates to $2.035 billion in 2016-17
  • Unemployment is expected to increase from 6.25% in 2015-16 to 6.75% in 2016-17, before decreasing to 5.75% by 2019-20

Major announcements

Transport infrastructure will receive $7.7 billion over the next four years, including:

  • $2 billion for the Forrestfield-Airport Link
  • $1.5 billion towards the Perth Freight Link
  • $427 million for the $1.9 billion MAX Light Rail project
  • $145 million for dual carriageway on Armadale Road

A further $1 billion will be allocated over the next four years on school infrastructure investment in addition to the $1.2 billion announced in 2015-16.

Other allocations include:

  • $526 million in 2016-17 of capital investment in health (including previously announced expenditure)
  • $378 million over four years for the new Perth Museum
  • $266 million increase in 2016-17 for public hospital services
  • $81 million increase in education expenditure during 2016-17
  • Seizing the Opportunity, an agricultural sector initiative, receives an additional $50 million
  • An additional $47 million over four years for tourism events, conferences and destination marketing
  • An additional $20 million over four years for an innovation package to strengthen, broaden and build the Western Australian economy

Social responsibility

The Budget has set aside the following amounts for social services:

  • $147 million over four years from 2105-16 to meet growth in the prison population
  • $67 million increase in spending on policing during 2016-17 to fulfil earlier announcements
  • An additional $50 million to meet demand for disability services outside the National Disability Insurance Scheme (NDIS)
  • An additional $26 million in 2016-17 to extend and expand NDIS trials

State taxes

The payroll tax exemption threshold will increase from $800,000 to $850,000 will apply from 1 July 2016 (as announced in the 2015-16 budget).