Bang goes Western Australia's boomFont Size: Decrease Increase Print Page: Print Amanda O'Brien, WA political reporter | December 19, 2008 Article from: The Australian WESTERN Australia's once-in-a-century boom is officially over, with new Treasury figures predicting the state will slide into deficit by 2011 and faces a near tripling of state debt to $16.7billion in the same period.
Treasurer Troy Buswell yesterday confirmed the state's AAA credit rating was potentially at risk, with net debt projected to be 50 per cent of revenue by 2010-11 and 60.9 per cent the following year.
The economy will end its phenomenal growth, with an anticipated 6 per cent growth rate wound back yesterday to just 1.5 per cent in 2009-10, surprising many analysts. Premier Colin Barnett said next year would be "the most difficult financial year this state has faced since probably the early 1990s".
"It is for many people new territory and new experience but I assure you the state Government will act," he said.
The new figures have slashed the state's expected budget surplus to $1.1 billion this financial year from a forecast $1.8 billion in May. It is then projected to drop to $723 million in 2009-10 and $105 million the following year, before plunging into a $361million deficit.
Mr Buswell denied the state's finances were in crisis but he conceded the situation was grim. "It is not an imminent financial crisis," he said. "(But) it is a very serious matter that we have to work hard and aggressively to address." The state's mid-year review showed a massive drop in property tax revenue and claimed it would continue for years. It forecast a $490 million decline in 2008-09, and a $2.4 billion fall over four years.
Falling commodity prices - particularly iron ore and oil - were expected to slice almost $4.4billion from government revenue over four years, although that reduction is expected to be offset by the depreciation of the Australian dollar, which should generate more than $5 billion for government coffers.
More worrying was the ongoing blowout in government spending, which is forecast to rise almost 8 per cent this financial year, and continue to soar above inflation in future years.
The falling revenue will be exacerbated by expected major cuts in GST revenue from the commonwealth. But Mr Buswell said he was most worried about debt. "Going into deficit ... is of concern, but the extent of the forecast increases in debt is of much greater concern."
Treasury predicts net debt will be $6.9 billion this financial year, compared with $3.6 billion last year, and will rise to more than $10 billion in 2009-10. By 2011-12, it is forecast to hit $16.7 billion.
The mid-year review has set the scene for government spending to be slashed, with Mr Buswell confirming some projects would be axed.
"There are some projects that ... won't happen; there are some that will be deferred; and there are some that will have their scale reduced," he said.
"Every item on the state's books that is over $20 million that hasn't yet gone out to tender is subject to the first phase of our capital works audit and then we will drill down in more detail and specific details will be provided as part of next year's budgetary cycle."
But Mr Buswell stuck by his Government's election commitments, which total more than $3.8billion over four years, saying they were fundamental to their election win and would stay.
