The McGowan state government has handed down its first budget since taking office. Its conservative with a touch of optimism on the back of key indicators showing improvement.
2016/17 was a particularly tough year as unemployment peaked at 6.5% and our gross state product barely grew, only increasing 0.25%. Enter 2017/18 - unemployment is 5.5% and forecast state gross product will grow 3%.
These numbers are improving but if you ask the average taxpayer they feel jobs are tightening, wages are reducing and debts are becoming more difficult to pay. There is always going to be a time lag when statistics improve and the community actually feels it, but it’s a suggestion we’re moving past the bottom. It will of course take time to get back to target figures such as the state budget in surplus, forecasted in 2021 which has not occurred since 2013.
There is however one critical detail which could have a huge influence on all of this - GST. The argument about GST carve up has been going on for years, beginning about the same time the WA economy started to decline. Have we got reason to complain we aren’t receiving our fair share? Yes, we do.
The system which calculates this carve up compares the states expenses (based on population), against the ability of a state to raise revenue. The population figures in WA haven’t significantly changed in the last few years so our expenses haven’t moved dramatically, however apparently our ability to raise revenue stays strong, how so?
Well a key contributor to this factor is the price of iron ore. The Federal Government locked into these calculators an iron ore price of around $123/t, which was during the boom in 2013. Today the government still uses this figure and leads them to distribute 3.8% (around $2.3b) of the total GST collected to WA.
The fall in Iron ore price is well documented, down to $39/t in 2015 and currently remains slightly above $70/t. A huge correction in the GST carve up is required and may lead to billions of revenue dollars for the struggling WA economy.
The federal treasurer Scott Morrison acknowledges the problem and a review is underway with reporting due early 2018, possibly contributing to the Federal budget next year.
The magnitude of this change could be huge, for example WAs budget deficit was used as the main reason Moodys downgraded WAs financial rating, significantly impacting the ability for the State Government to invest in the economy.
The $2.4b deficit is due for surplus in 2021 but imagine if we could fast forward this process - investment, jobs, growth and wages would all improve delivering real optimism and confidence in our economy.
Could the change see WA receiving a greater slice of the pie, leading to increased sales of houses, increase in jobs and better salaries ? Let's hope so. If you need help with your settlement get in touch with Justine at Mosaic Settlements today - 0438 112 434 or email@example.com