WA mid-year economic review shows budget surplus booming, but Christmas party scandal overshadows news

George Rehder 5

By Benjamin Gubana

Copied, edited & compiled by JD Schildmann 19/12/2019

A mid shot of a stern looking WA Treasurer Ben Wyatt standing at a podium in front of two flags.
Ben Wyatt has handed down a mid-year financial review that puts the budget firmly in surplus.

Western Australia’s finances have been given a $1 billion boost, as the impact of soaring iron ore prices continued to bolster the state’s coffers.

Key points:

  • WA’s budget surplus is now forecast at $2.6b for the 2019–20 financial year
  • It is more than $1 billion higher than the state budget forecast in May
  • The good news was overshadowed by a Christmas party resignation scandal

But the news came as the Government faced increased scrutiny over Treasurer Ben Wyatt’s senior media adviser, who resigned over his actions at a staff Christmas party, with police called in yesterday to investigate.

A police spokeswoman has confirmed a complaint had been received and inquiries were ongoing into the incident.

In handing down the mid-year economic review, Mr Wyatt said a higher than expected iron ore price meant the Government was now eyeing off a $2.6 billion surplus for the 2019–20 financial year.

That figure is more than $1 billion up on the 2019 budget forecast released in May, which anticipated a surplus of $1.5 billion for 2019–20, growing to $9.3 billion over the forward estimates.

A pile of Australian dollar coins on top of several bank notes
The 2019 budget estimate of a $1.5 billion surplus has been dramatically increased.

The latest figures showed WA was $1.6 billion in the black between July and September — $100 million more than the surplus expected for the full year.

“The operating surpluses have been revised up, particularly this financial year 2019–20, it’s been revised up by just over a billion dollars,” Mr Wyatt said.

“[That is] mainly driven by iron ore prices and the Australian dollar.

“The important point to note is that that gives us the capacity to fund capital investment and to pay down debt, and … protect ourselves from the global volatility that we’re now in.”

Iron ore estimates to stay conservative

While the iron ore price has been increased in the outlook, Mr Wyatt said Treasury’s price estimates would remain conservative over the forward estimates.

State debt remains high at $37.5 billion for 2018–19, but following revised estimates the Government now said that would be the peak debt figure, rather than the forecast $39.5 billion for 2019–20.

Iron Ore Haul Pack
 Soaring iron ore prices have been driving money back into WA’s coffers.

The review forecast debt to fall to $36.2 billion for 2019-20, declining over the forward estimates to $34.5 billion in 2022–23.

Tax collections have been written down by $607 million, while GST revenue has also been revised down by $632 million.

While the Government has committed to rein in spending, it is tipped to use the improved economic position as a war chest for a spending spree ahead of the next election due in March 2021.

But Mr Wyatt was keen to point out the positive figures could change due to the volatility of iron ore prices.

Resignation scandal overshadows Treasury

While Mr Wyatt was eager to spruik the Government’s fiscal responsibility, the news was overshadowed by revelations his key media adviser quit after an incident at a staff Christmas party last week.

Stephen Kaless resigned after the Department of Premier and Cabinet began investigating “unwelcome physical contact” with a woman.

A middle-aged man in a suit and tie laughs while standing on the pavement near a building.
The resignation of Stephen Kaless, media adviser to the WA Treasurer Ben Wyatt, was a major distraction from economic news.

Mr McGowan said the incident occurred at a staff Christmas function on Friday evening and resulted in Mr Kaless being suspended indefinitely by the WA Government.

He subsequently tendered his resignation on Monday morning.

Police attended the Treasury office in Dumas House and took a statement from the woman late on Tuesday.

Mr Kaless had been Mr Wyatt’s key media adviser since Labor’s 2017 election victory.

He previously worked as a senior media adviser for Premier Mark McGowan when he was opposition leader and spent four years as the chief of staff of the Channel 7 Perth newsroom.

Government can’t take credit: Opposition

Shadow Treasurer Dean Nalder welcomed the state’s “good financial numbers”, but did not credit the Government with the success.

“The budget surplus is growing nicely for the state. [But] I will say that 100 per cent of the budget surplus is down to two factors,” he said.

“It is down to iron ore prices and the GST fix. They actually account for more than 100 per cent of the budget surplus.”

Mr Nalder said the Government needed to do more to improve WA’s sluggish economy.

“The domestic economy continues to be the major concern for the State Government and something that we believe they haven’t done well,” he said.

“We’re now seeing record levels of mortgage stress, record levels of defaults, record levels of negative equity and record levels of utility disconnections.

“These are the repercussions of the policies of the State Government.”

Financial restraint must continue, CCI warns

The Government said that although global and national economic headwinds had intensified since the May budget — and impacted on growth projections — growth in the WA economy was still expected to accelerate to 3 per cent this financial year, up from 1 per cent in 2018–19.

Chamber of Commerce and Industry (CCI) chief executive Chris Rodwell said Mr Wyatt and Mr McGowan deserved credit for disciplined financial management, but said paying off debt should be paramount.

A tight head and shoulders shot of Chris Rodwell talking outside State Parliament in Perth.
 WA CCI chief Chris Rodwell says paying down debt remains essential to fixing WA’s finances.

“The 2018-19 financial year marked the first time WA’s finances have been back in the black since 2013–14,” he said.

“The restraint in expenditure needs to continue. A revenue windfall of $1.1 billion was based on one-off increases in iron ore prices that cannot be relied on in future.

“Total public sector net debt has peaked, but there is still a $36 billion debt to pay off, amounting to $17,000 for each and every West Australian.”

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