CCIWA Chief Economist
The 2023-24 State Budget confirms the current strength of the WA economy, but highlights risks to the outlook as growth is forecast to plummet in coming years.
Western Australia’s economy is expected to grow 4.25% in the current financial year, the highest rate in nine years. This result is largely on the back of business investment and exports. The Government also expects inflation to decline rapidly next year, falling to 3.5%. However, growth will reach just 1.5% at the end of the budget forecast period.
The State’s finances are still very strong, especially compared to other states. The Government is expected to bank a $4.2b surplus this financial year. However net debt is not expected to peak over the forward estimates.
A critical support for the State’s finances is the 2018 GST deal. In the absence of the deal, WA would receive just 9.8 cents in the dollar next financial year. CCIWA was at the heart of the effort to fix the GST. We stand ready to campaign to defend the deal in the national interest, and we support the $1.6m commitment in the Budget for a Treasury team to safeguard it.
Importantly, the State and Federal governments have jointly funded a $650 credit for small businesses with annual electricity consumption of less than 50 Megawatt hours.
But despite the State’s good fiscal fortune, the State Government has not alleviated the burden of payroll tax on WA small and family businesses. This means WA small and family businesses will still bear the heaviest payroll tax burden in the country, with total payroll tax collections forecast to reach $5.5 billion in coming years. It’s critical action is taken to reduce the burden to help alleviate the higher costs of doing business and to make WA a more attractive place to invest.
The State Government has taken some steps to diversify the economy, including a $40 million Sustainable Geoscience Investments package to accelerate critical minerals discoveries, an expansion of the New Industry Fund, and funding for the previously announced Trade and Investment Office in Austin, Texas. It should remain open to do more given the transformative efforts from other economies, notably the US and Canada, to redirect capital flows to drive decarbonisation.
In addition to relieving the burden of payroll tax on small and family businesses, it’s critical the State Government also accelerate its efforts to make it easier to get approvals for major projects, including by pushing the Federal Government to rein in the Federal Department of Environment, which is increasingly frustrating the efforts of WA investors.