Treasury highlight McGowan Government’s economic and financial credentials

Posted on February 8, 2021
  • Treasury’s independent Pre-Election Financial Projections Statement shows the strong economic and financial management of the McGowan Labor Government
  • Independent analysis shows the McGowan Government has fixed the financial wreckage left by the previous Liberal National Government
  • Strong net operating surpluses projected over the next four years, in contrast to massive record deficits and debt when the previous Liberal National Government left office
  • Despite a global pandemic, there are 77,000 more Western Australians employed now than there were under the previous Liberal National Government at the time of the last State Election
  • The WA Recovery and Jobs Plan is keeping our economy strong and creating local jobs

The McGowan Labor Government’s safe and strong management of the WA economy has been highlighted by the independent Treasury analysis released today.

Treasury has released the 2020-21 Pre-Election Financial Projections (PFPS) providing its independent outlook for the State’s finances and economy over the next four years. 

It highlights the McGowan Government has delivered on its promise to fix the financial mess left by the previous Liberal National Government, and to keep Western Australians safe and our economy strong through the COVID-19 pandemic.

Over the next four years Treasury projects strong net operating surpluses under Mark McGowan and WA Labor. The strong surplus position is in stark contrast to the massive projected operating deficits totalling some $6 billion when the Liberal National Government left office, including the largest deficit on record of $2.5 billion in 2016-17.

Under the McGowan Government, prior to COVID-19, WA was the only state with debt expected to decline, with debt around $9 billion lower compared to projections for 2019-20 when the previous Government left office.

The State’s improved financial position provided the capacity for an unprecedented response to COVID-19 from a position of strength.

The McGowan Government has committed more than $7 billion for the WA Recovery and Jobs Plan and made a record investment of $28.9 billion in infrastructure to support our economic recovery, create jobs and benefit Western Australians over the long-term.

Treasury expects net debt will reach $40.2 billion by 2023-24, $1.2 billion lower than anticipated at the Mid-year Review.  This compares to an almost eightfold projected increase in net debt under the Liberal National Government. Net debt is expected to decline in 2023-24, with the Budget returning to a cash surplus.

Net debt to revenue, a metric used by credit rating agencies to indicate debt serviceability, was the worst of the states under the Liberals and Nationals in 2016-17 and had been forecast to reach 90.9% in 2019-20.

Under the McGowan Government, the ratio reduced to 61% by 2019-20 and is still expected to remain at around 65% by 2023-24, which would be the best of the states based on current projections.  This is significantly lower than forecast ratios for New South Wales (140 per cent), Victoria (207 per cent), Queensland (118 per cent), and South Australia (134 per cent).

The decision by the McGowan Government to keep the mining sector operating during the pandemic has resulted in strong mining revenue in 2020-21, although Treasury expect this to be temporary with iron ore prices assumed to revert to around the long-run average of $US64/t in line with Commonwealth forecasts. The higher iron ore price has been partly offset by a higher Australian dollar.

Treasury forecasts the WA economy will grow by 2 per cent in 2020-21, the strongest projected growth of the states and follows WA achieving the highest growth in gross state product (GSP) of 1.4 per cent in 2019-20, when most state economies contracted.

Treasury expects the recent five-day lockdown necessary to prevent community transmission of COVID-19 will not materially impact its economic forecasts.

Treasury has further revised up employment growth to 1.5 per cent in 2020-21, from 1 per cent in the Mid-year Review.  The unemployment rate is now forecast to average 6.5 per cent this financial year, down from 7 per cent in the Mid-year Review. 

Since March 2017, the McGowan Government has overseen the creation of around 77,000 jobs despite COVID-19 creating the biggest global economic crisis in the post-war era.  WA currently has the lowest unemployment rate of the states at 6.2 per cent, based on the most recent data for December 2020. 

Under the Liberals and Nationals, the WA economy contracted by 1.3 per cent, the State’s only annual contraction on record.  The unemployment rate rose from 2.9 per cent when it came to Government to 6.3 per cent when it left office in March 2017.

Comments attributed to Treasurer Ben Wyatt:

“The Treasury update highlights the hard work of the McGowan Government over the past four years to turnaround the financial mess left by the Liberals and Nationals, and at the same time to support Western Australians through the pandemic and our economic recovery.

“Treasury’s independent outlook aligns with the credit rating agencies commentary of this Government’s strong fiscal resolve and expected outperformance of the WA economy. 

“This contrasts with the Liberals and Nationals who lacked the discipline to manage the State’s finances and economy.

“Treasury also highlights the number of Western Australians employed has significantly increased under the McGowan Labor Government – that’s because WA jobs has been this Government’s number one priority.

“Under Mark McGowan, WA is the only state in Australia with a Budget Surplus – meaning we can invest in our record infrastructure program, including a new Women and Babies Hospital.

“The McGowan Labor Government has allocated every dollar of the strong net operating surpluses to its record infrastructure program, reducing the need for additional borrowings.

“The 2020-21 PFPS highlights that the McGowan Government has the experience and the track record to continue to manage the state’s finances, create WA jobs and drive our continued economic prosperity.”

COVID-19 Business support measures

The McGowan Government has provided more than $1 billion as part of the WA Recovery Plan for a range of measures to support businesses during the COVID-19 pandemic, including: 

o A $500 electricity offset following the recent 5-day lock-down to small businesses and charities consuming less than 50MWh per annum, which are serviced by Synergy and Horizon Power. (A grant program will be established for small businesses that aren’t direct customers of Synergy and Horizon but pay through a landlord.)

o A $2,500 electricity offset previously provided to around 85,000 small business and charity customers, serviced by Synergy and Horizon.

o A range of payroll tax relief measures including:

• $17,500 grants for payroll tax paying businesses with Australia-wide payrolls below $4 million;

• Exempting JobKeeper payments from payroll tax;

• A four-month waiver of payroll tax for businesses with payrolls below $7.5 million; and

• Bringing forward the increase in the payroll tax exemption threshold by six months from $950,000 to $1 million.

o A wide range of business licence fees waived including those for tradies, tourism operators, liquor licence holders, and more.

o Grants of up to $6,000 for businesses to hire displaced apprentices or trainees whose contracts were terminated due to COVID-19.

o A six-month rent waiver for small businesses and not-for-profits in Government-owned buildings.

o Land tax relief for landlords that provide rent relief to small business tenants.

o No disconnections for water and power bills and no interest charged on late payments for businesses financially impacted by COVID-19.

o Waiving late payment penalties for transfer duty and landholder duty.

o Tailored relief for specific industries impacted by COVID-19 such as:

• The $20,000 Building Bonus to support the pipeline of work for the construction industry;

• Grants for tourism operators and travel agents, as well as regional flight subsidies and tourism vouchers to holiday in the regions, and support hotels in Perth; 

• Relief on wastewater charges particularly for hotels and restaurants; and 

• Support for the events sector with waivers of hire charges for government-owned venues and to underwrite financial risks associated with COVID-19.

  • ●     WA businesses are also expected to benefit from the McGowan Government’s record $28.8 billion  infrastructure investment program over the next four years providing a significant boost to our economy and jobs.

COVID-19 Households support measures

Western Australian households have also benefited from support measures as part of the WA Recovery Plan and additional initiatives to provide cost of living relief and support vulnerable households.

• The average WA household benefitted from a record 10.4 per cent reduction in household fees and charges in 2020-21 via the combination of:

o The $600 WA Household Electricity Credit provided in late 2020;

o Freezing household fees and charges, including electricity, water, public transport and motor vehicle charges; and

o A decrease in gross rental value related charges including wastewater and drainage charges and the emergency services levy.

• A one-off doubling of the Energy Assistance Payment from $305 to $610 provided support to more than 300,000 vulnerable households. 

• No disconnections of power or water for households experiencing financial hardship due to COVID-19, as well as no interest charged on deferred bill payments.

• A moratorium on evictions and rent increases to support residential tenants through the pandemic, ending March 28, 2021.

• Various residential rent relief grants to support tenants and landlords, including:

o Grants of up to $2,000 paid to landlords to rent for tenants who had lost their job due to COVID-19;

o Grants of up to $4,000 for accumulated rent waived or deferred for tenants who lost their job or suffered a significant income loss due to COVID-19, in exchange for extending tenancies by at least six months; and

o Grants of up to $2,000 for tenants facing hardship due to increases of rent of more than 5 per cent as the moratorium ends, with landlords required to agree to a tenancy extension of at least six months.

• In addition to these measures, the Lotterywest COVID-19 relief fund was also established to provide support to organisations that are helping vulnerable Western Australians experiencing hardship during the pandemic.