Only a few years after the greatest mining boom in Australia's history, WA's own treasurer says its finances are in such a dire state that only privatising 51 per cent of utility Western Power will get its record debt under control.
And only a few months after Prime Minister Malcolm Turnbull promised to fix the grants system that has allowed WA’s share of national GST revenue to fall to just 30 cents for every dollar it raised, Treasurer Mike Nahan has downgraded its projections over the next four years.
In May, the GST share was tipped to rise to 76 cents in 2020, but now the government is only forecasting 66 cents.
WA’s government debt is forecast to rise from about $28 billion at the end of June this year to $39.7 billion in 2020, Dr Nahan revealed in the government’s mid-year economic review.
This year’s state deficit is forecast to be a record $3.39 billion, which is $527 million lower than forecast in the May budget thanks to better-than-expected iron ore prices.
Iron ore contributes 20 per cent of WA government revenue.
The economy had slowed and revenue from taxes was down, Dr Nahan said.
The government could not do much more to cut spending without affecting the quality of services, he said.
“Without a circuit breaker our finances won’t recover to the extent that it will bring debt in the forward estimates down in a manageable and acceptable manner.”
A solution is the proposed share market float of 51 per cent of Western Power, which the government says would boost the budget by $11 billion – it would wipe out $8 billion of public debt and provide $3 billion in cash for infrastructure.
Dr Nahan rejected the suggestion the current woeful state of the government’s coffers is proof it wasted the unprecedented billions of dollars of mining royalties earned during the mining boom.
“Did we get it wrong (iron ore prices)? Yes. Did everybody? You better believe it,” he said.
“Should we have taken a less risky approach by providing less services?
“But we were getting 85,000 people into WA (a year) largely from overseas and the demands on health, schools, police, roads and infrastructure were absolutely phenomenal.”
WA Nationals leader Brendon Grylls, who supports the Western Power sale, said he was committed to pushing for his new $5 a tonne tax on iron ore produced by BHP Billiton and Rio Tinto being implemented to fix the state’s budget.
He criticised WA’s most senior federal Liberal MPs, including deputy leader Julie Bishop and Finance Minister Mathias Cormann, for not tackling the GST shortfall.
If WA had received 100 cents in the dollar for GST in 2015-16 that would have added $4.5 billion, greater than its $2.03 billion deficit.
“It is an absolute disgrace, it smashed the Western Australia’s economy … West Australians need to draw that line in the sand and demand (the) floor in GST Malcolm Turnbull committed to delivering. Without that floor the West Australian economy is in structural decline.”
The economic outlook in the budget review was positive, with unemployment forecast to fall from 6.75 per cent to 5.75 per cent in four years, and wages growth, inflation and the population to all grow by more.
Shadow treasurer Ben Wyatt said Dr Nahan and Mr Grylls were offering false “magical solutions” to fix the debt but there was no easy answer to paying off the large debt load.