Spending reduction, not tax increases, will help WA economy

The Western Australian Government is still the highest spending state government per person in the country. This must change if it wants to turn the Budget around and support job creation.

The Chamber of Commerce and Industry WA (CCI) has today released its 2018-19 Pre-Budget Submission, which calls on the Government to continue to reduce spending to return WA to its pre-boom size, pay down the State’s 2020-21 forecast $43 billion net debt and regain its AAA credit rating.

CCI Chief Economist Rick Newnham said while the Government had made some progress, the dire state of WA’s accounts reflects that the State has a spending, not a revenue problem, which means taxes must remain stable.

“Government spending is now at a record high $31 billion – 20 per cent higher than at the peak of the mining resources boom in 2012-13,” Mr Newnham said.

“If the WA Government had reduced its unsustainable per person spending to that of Queensland, which has even higher regional population costs, it could have saved more than $560 million last financial year alone. If it reduced spending to the average of all states it would have saved $1.9 billion.

“Now is not the time to be increasing taxes – unemployment has reached a 16-year high so business investment must be supported to create new WA jobs.”

CCI has presented the State Government with a series of recommendations to reduce government spending whilst keeping taxes stable to ensure business can continue to create local jobs.

“Relentlessly reviewing health expenditure to identify efficiencies, including adoption of new technologies that allow for streamlined service delivery, thereby reducing costs, is critical,” Mr Newnham said.

“Costs in WA’s allied health and pharmacy sectors alone were on average almost 30 per cent higher than the national average in 2014-15. At the same time, WA had the lowest number of hospital beds available per 1,000 people by region compared to other states, and in 2016-17 only 64 per cent of patients were seen on time – the lowest proportion of all the states.

“The Government can also look to innovate by partnering with the private sector to deliver social outcomes through Social Impact Bonds, ensuring government spending is efficient with a more stringent focus on results.”

Public sector wages are the single largest area of government expenditure (40%) and is forecast to decline by 1 per cent over the forward estimates.

“The Government deserves a lot of credit for the strict enforcement of its public-sector wages policy. Maintaining this discipline will be essential to fixing the Budget,” Mr Newnham said.

“If there was anything close to a silver bullet for budget repair, it would be asset sales.

“CCI has welcomed the Government’s consideration to sell Landgate and the TAB, and we encourage this to continue across all State-owned assets, including Western Power, which if partially sold would wipe almost $11 billion off net debt.

“To give confidence to business and households, CCI urges the Government to create a stable investment climate in the State Budget by continuing to reduce its own spending, not increasing taxes that will hurt economic recovery.”

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