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State Budget 2023 five-minute guide: All you need to know about Mark McGowan’s third Budget as Treasurer - The West Australian

Rebecca Le MayThe West Australian
State Budget five minute guide.
Camera IconState Budget five minute guide. Credit: Danella Bevis, Adobe Stock

Mark McGowan has handed down his third Budget as Treasurer and fifth consecutive surplus as Premier that he credited to WA’s ongoing export strength and responsible financial management.

Here’s what you need to know:

FINANCES

WA is set to book a $4.2 billion surplus this financial year, a huge jump from $1.8 billion predicted in the mid-year review, mainly thanks to higher iron ore prices. The projected surplus slides lower to $3.3 billion for the 2023-24 financial year, based around much lower iron ore prices that ratings agency S&P describes as “conservative ... a steep fall”.

Further surpluses are predicted in each of the next three financial years, totalling $7.8 billion across that period.

Net debt is staying on track to dip to $27.9 billion by June 30, but will then steadily bounce back up, reaching $35.9 billion in 2026-27.

Mr McGowan agreed the iron ore forecasts were conservative - deliberately so in contrast to the higher-than-consensus predictions by the former Liberal Government, which left the State with a debt “mountain”. That meant there was a good chance debt could wind up lower than predicted in coming years, he said.

HOUSEHOLD FEES AND CHARGES

Mr McGowan unveiled a $715 million cost of living relief package for WA families and small businesses, with a $400 electricity credit for all households, split over two equal payments in the July-August and November-December billing cycles as its centrepiece. About 350,000 households on concession cards will get a $500 deduction off their electricity bill — which is the $350 rebate announced as part of the Federal Government on Tuesday plus a $150 top-up by the State Government.

About 90,000 small businesses that use up to 50MWh of power per year will get a $650 credit.

Only school student Transperth and Transwa fares were frozen at 70¢— while standard fares will lift by 2 per cent. The price of power and water will rise by 2.5 per cent from July, with Mr McGowan at pains to stress the household basket of fees and charges had been kept below inflation for the fourth consecutive year.

IRON ORE

The all-important engine room of the State’s budget, iron ore, delivered $9.28 billion in royalties to Treasury coffers this financial year, with those lower price forecasts meaning it is expected to bring in almost $6 billion in 2023-24.

The commodity remains by far the most significant single source of income for WA, accounting for around 75 per cent of total royalty income on average from 2023-24 onwards, down from more than 80 per cent this fiscal year.

But after an estimated average price of $US112.3 per tonne in 2022-23, the steel-making commodity is expected to fall back to $US74.10 in 2023-24 and $US66/t thereafter. Ratings agency S&P tips $US90/t over the next two years.

WAGES

Wage growth has lifted from a well-below inflation rate of 2.2 per cent in 2021-22 to a projected 3.75 per cent this financial year, and is tipped to bounce slightly higher to 4 per cent in the coming fiscal year before steadily declining again to 3 per cent in 2026-27.

The Budget papers explained that wages would gather pace over the near term as companies aimed to attract and retain staff in a competitive market. But growth would slow from 2024-25 as labour demand eased and labour supply was boosted by rising overseas migration.

Inflation, meanwhile, appears to have peaked in the December 2022 quarter and is projected to ease to 5.75 per cent this current quarter and 3.5 per cent by June next year.

Perhaps optimistically, inflation growth is expected to return to being within the Reserve Bank of Australia’s target band of 2 per cent to 3 per cent from 2024-25.

TOP TWO FUNDING COMMITMENTS

A whopping $2.8 billion has been allocated to energy storage, wind power generation and transmission network upgrades on the South West Interconnected System, including $2.3 billion installing one of the world’s biggest batteries in Collie as it moves towards green energy and away from coal.

A record $2.7 billion of extra investment in the State’s health and mental health system includes $1.2 billion for major public hospital infrastructure projects including $100 million to complete the first stage of an Electronic Medical Record and $218.9 million for stage one of a reconfiguration and upgrade of the Graylands Campus.

OPERATING SURPLUS

2022-23: $4.2 billion

2023-24: $3.3 billion

2024-25: $2.3 billion

2025-26: $2.5 billion

2026-27: $2.8 billion

NET DEBT

2022-23: $27.8 billion

2023-24: $29.3 billion

2024-25: $32.7 billion

2025-26: $35.2 billion

2026-27: $35.9 billion

UNEMPLOYMENT RATE

2022-23: 3.5%

2023-24: 4%

2024-25: 4.25%

2025-26: 4.5%

2026-27: 4.5%

WAGES GROWTH

2022-23: 3.75%

2023-24: 4%

2024-25: 3.75%

2025-26: 3.25%

2026-27: 3%

IRON ORE PRICE ($US/TONNE)

2022-23: $112.30

2023-24: $74.10

2024-25: $66

2025-26: $66

2026-27: $66

GOVERNMENT EXPENSES 2023-24

Health and Mental Health: $12.12 billion (30%)

Education: $6.42 billion (16%)

Electricity and water subsidies: $1.65 billion (4%)

Roads, rail and transport: $4.06 billion (10%)

Community safety: $4.34 billion (11%)

Communities: $3.1 billion (8%)

Training and TAFEs: $982 million (2%)

All other: $7.17 billion (18%)

NET CONTRIBUTION OF EACH STATE TO THE FEDERATION PER CAPITA

WA: $13,167

NSW: $627

VIC: -$735

SA: -$6,844

QLD: -$2,528

TAS: -$10,575

NT: -$19,788

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2023-05-11 06:08:00Z
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