The strange case of Western Australia's government finances.

Anderson, D and Hayward, D 2014, The strange case of Western Australia's government finances., BIS Shrapnel, Australia


Document type: Commissioned Reports
Collection: Commissioned Reports

Title of report The strange case of Western Australia's government finances.
Author(s) Anderson, D
Hayward, D
Year of publication 2014
Publisher BIS Shrapnel
Place of publication Australia
Subjects Public Economics- Taxation and Revenue
Public Policy
Abstract/Summary Western Australian has had a five star economy over the last decade. Driven by demand for minerals and energy from Asia, particularly China, economic growth has been 50% higher than that of Australia as a whole. The booming economy has brought with it a rapidly expanding population, as well as an enlarged labour force in remote locations (see for example WA Government, 2013, Budget Strategy and Outlook 2013/14, Budget Paper Number 3: Chapter 2). Growth brings with it increased government revenues. But it also requires increased expenditures, both for services and infrastructure. Getting the balance right is by no means easy, particularly in infrastructure. In the Australian federation the situation is particularly tricky because the Commonwealth raises the majority of tax revenues, but is responsible for less than half of public spending. General purpose grants to the states and territories are based on a formula that redistributes revenue from fast to low growth economies. Making it even trickier is that some of the State's taxes, such as stamp duties on property transfers, are volatile and can go from boom to slump rapidly. It is in this context that the Western Australian public finances need to be understood. In late 2012 two of the big 3 international credit rating agencies placed the State on credit watch, indicating its AAA rating was at risk. In what otherwise appeared to be a relatively generous May budget, the Government announced a range of austerity measures, including tax increases of $475m per annum and expenditure reductions of $500m rising to over $2b in four years time. Infrastructure rollout was also delayed in order to generate further savings of $1.3b over four years.
Commissioning body UnionsWA
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