ABN: 96 929 977 985 ACN: 099 891 611
Copyright © 2021 Chamber of Commerce and Industry of Western Australia
BUDGET BY NUMBERS
Western Australia’s economy is expected to grow by 3.50 per cent this financial year – the strongest expansion in eight years and much higher than the 2.75 per cent that was forecast back in February.
If this growth is achieved, it will have been driven by strong mining investment (+9.75 per cent in 2021-22), robust household consumption (+2.5 per cent), and a whopping 21.75 per cent uplift in dwelling investment following the State Government’s building bonus incentive.
Consistent with an improving economy, WA’s labour market is expected to continue to tighten – with the headline unemployment rate forecast to hit 4.75 per cent this financial year before holding steady at 4.5 per cent over the next three years.
Soaring commodity prices, stamp duty receipts and GST collections have boosted the State’s financial position, with the WA Government expected to print a final operating surplus of $5.6b in 2020-21 – a record high – and $2.8b this financial year.
Even after accounting for infrastructure spending, the Government is expecting to record a cash surplus of $1.8b this financial year - a significant turnaround from the $2b deficit expected in last year’s Budget.
While the outlook remains generally positive, significant risks remain. These include a new wave of COVID-19 via the Delta strain (amid languishing vaccination rates), continually declining commodity prices and the ongoing closure of WA’s international and interstate borders.
STATE BUDGET ANALYSIS 2019
ABN: 96 929 977 985 ARBN: 099 891 611
Copyright © 2021 Chamber of Commerce and Industry of Western Australia
WORK HEALTH AND SAFETY HARMONISATION
STRONG STANCE ON
COMPANY TAX PLAN WELCOMED
The Government will be engaging another 46 WorkSafe officers to assist with implementing the Work Health and Safety Act. We welcome this increase in resources and encourage the Government to make these additional resources immediately available. This will be necessary to allow WorkSafe to undertake the massive task of developing its own capabilities and commence an education campaign on the new laws ahead of the January 2022 implementation date.
We are disappointed the Government hasn’t reintroduced the successful ThinkSafe Small Business Assistance Program, which allowed businesses to seek independent assistance to improve workplace safety. Although $30,000 will be provided each year to five employer associations over the next four years, this is a small investment compared to the estimated $86m in unrecoverable costs that will be borne by small and medium-sized WA businesses as a result of changes to the WHS Act.
SKILLS AND WORKFORCE
WA’s isolation from the rest of the world is assumed to continue for at least the next 12 months — but the Budget fails to address WA’s skills crisis.
The Budget includes a $121.4m investment in training and $4.1m to attract workers from the east coast and New Zealand to help relieve the skills crisis crippling WA businesses. But with the State not likely to reopen domestically for at least the next seven months and students taking time to gain the experience businesses require, more needs to be done to enable businesses to access experienced workers from overseas, now.
The Government is spending $9.9m on enabling TAFE lecturers to gain industry experience. This is a step in the right direction towards bridging the gap between industry and the education system, which is critical to ensuring that young people can effectively transition from study to work.
We welcome the Government’s negotiations with the Commonwealth on a new four-year funding agreement for Universal Access to Early Childhood Education. The Minister for Women’s Interests has recognised that WA still has the nation's biggest gender pay gap, and that women bear the load of unpaid domestic work.
Constructively engaging with the Commonwealth in this landmark reform, which would allow universal access funds to follow the child and give parents more choice over where their kids attend kindy, will assist in addressing these issues.
INFRASTRUCTURE
Strong infrastructure spend will continue to be undermined by skills shortage and lack of housing to accommodate workers.
There has been a significant investment in infrastructure over the next four years, including:
- $400m for strategic land acquisition for Westport.
- $1.4b for a new desalination plant (powered by renewable energy).
- $200m to improve critical agricultural supply chains.
There has also been a significant commitment to social housing, which will deliver an estimated 3300 social housing properties to address homelessness and a housing shortage facing this State.
With the current unprecedented pressure on skills, workers and critical materials, the Government has moved to delay key infrastructure projects to deliver a pipeline of work over the longer term.
Skills shortages and housing to accommodate workers will continue to be a major policy challenge facing the State. A review of current border arrangements and mechanisms to fast-track housing to accommodate workers will need to be priority considerations.
Soaring iron ore royalties and GST payments deliver WA a record $5.6 billion surplus in 2020-21.
Increased funding for WorkSafe to roll out workplace safety reforms not enough to help employers implement new changes.
TELL US WHAT YOU THINK
OUR VERDICT
STATE BUDGET ANALYSIS 2021
OPPORTUNITY MISSED FOR BOLDER ECONOMIC REFORM
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The State Budget shows our economy running hot, with WA possessing the most enviable set of books in the nation. This strong position is funding greater investments in health and infrastructure.
With a $5.6 billion operating surplus and an underlying cash surplus of $2.6b, the Government is bucking a global trend of bigger deficits and bigger debt.
Even amidst the pandemic, WA is paying down debt, and is set for extraordinary GSP growth of 3.5 per cent in 2021-22.
But we needed to see bolder economic reform in this Budget to diversify our economy.
Forecasts out to the middle of the decade show we won’t hold this pace, hovering between 1.0-1.5 per cent out to 2025.
Population growth will slow to 0.7 per cent.
Business investment growth beyond the current year is anaemic, and heavily dependent on mining. A $100 million investment attraction fund should support efforts to lift investment, but there is no greater incentive for a business to invest than a low-cost, predictable and reasonably regulated economy.
Growth in house prices will drop and WA’s skills and labour crisis will continue, with borders to remain shut well into 2022.
The risks to our Budget position include uncertain iron ore prices, pressure from the Eastern States to renegotiate the GST deal, and the removal of caps on public service wage rises.
Our State is not yet pulling the levers that would provide sustained, stronger economic growth and diversification.
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RED TAPE REDUCTION
Encouraging signs, but still far more work to be done.
The Government has allocated $500m to improve its digital and technology infrastructure, including to improve cyber security.
This is a necessary step in the right direction. However, the WA Government is a long way behind the rest of the country. Far more investment is needed before WA businesses are enjoying the same streamlined digital interface with government as their counterparts in other States.
We welcome the $120m investment in resources to accelerate approval of major projects. Business investment has often been restricted by a lack of appropriately skilled people in government to shepherd and approve major projects.
The Government must, however, be transparent about the impact of the additional resources, including reporting on the reduction in approval timeframes and resultant lift in investment.
INDUSTRY DEVELOPMENT
Investing in new and emerging industries for the jobs of the future.
The Government is investing $100m in new and emerging industries to create jobs that will help diversify the WA economy. The Investment Attraction and New Industries Fund will support industry assistance, attraction and grants across a range of emerging industries, including battery manufacturing, green steel, cyber security and space. This funding builds on existing industry development initiatives, such as the New Industries Fund.
Our Pre-Budget Submission called for government to increase its focus on developing WA’s manufacturing sector by establishing an overarching manufacturing Industry 4.0 strategy.
Supporting WA’s manufacturers to adopt new technologies and processes would enable them to capture greater global market share and grow jobs. We urge the State Government to develop this strategy, and to ensure a broad range of manufacturers are eligible to apply for support.
ENERGY POLICY AND CLIMATE CHANGE
Government leadership on climate change is essential to activate commercial opportunities for WA businesses.
We welcome the leadership by the State Government on climate change mitigation and adaptation. Leadership from government will reduce risk for WA businesses and support them to capitalise on commercial opportunities created by emerging renewable industries and technologies.
The Government’s investment is headlined by a $750m Climate Action Fund, which includes:
- $206m for renewable energy projects
- $144m to create climate-resilient communities.
- $50m to drive a new renewable hydrogen industry..
Other funding commitments include transforming the Oakajee
Strategic Industrial Area to a renewable hydrogen hub, expansion of the State’s softwood plantation estate and carbon innovation grants. In addition, there are important sector-specific initiatives such as the $15m Agriculture Climate Resilience Fund and the $15m Carbon Farming and Land Restoration Program.
While the WA Government has made some important energy reforms to ensure reliability of energy supply, it is disappointing that retail contestability is still not a priority. Allowing all non-residential customers (including those on sub-meters) to choose their electricity retailer would help drive down prices by promoting competition. In contrast, the Budget sets out increasing prices over the forward estimates for noncontestable customers, which includes many small and medium-sized businesses.
HEALTH AND COMMUNITY SERVICES
Long overdue investment in our health system and social housing.
The Government has committed substantial funding towards more infrastructure, staff and services for our health and mental health systems. The funding covers a workforce attraction and retention strategy, including a recruitment campaign to bring health professionals to Western Australia.
Initiatives include:
- $487m for COVID preparedness and response measures.
- $2.1b investment over four years in social housing, with $875m budgeted for 2021-22.
The $2.1b includes a $750m social housing investment fund, as well as funds to deliver new social homes from 2022-23; for regional social housing; to spot purchase social housing; and support business case development for future social housing development.
The funding will result in the build of about 3300 new properties over the forward estimates, though construction of some of these homes will be delayed due to skills shortages. Approaches such as modular homes will be explored to alleviate these pressures.