The state government has forecast continued budget surpluses but behind the headline numbers lie big “cash deficits” and a large increase in state debt.
The state government has forecast continued budget surpluses but behind the headline numbers lie big “cash deficits” and a large increase in state debt.
Treasurer Rita Saffioti said the budget surplus is expected to be $3.2 billion in the year to June 2024 .
That is down from $3.7 billion that was forecast in the mid-year budget review in December, largely because of timing differences in Commonwealth payments and a relatively low iron ore price of $US100 per tonne when the budget numbers were finalised.
The operating surplus factors in continued rapid growth in government spending: up 8.9 per cent in FY24 after growth of 8 per cent in FY23.
That is partly offset by revenue growth averaging about 4 per cent per year.
Treasury has projected smaller budget surpluses in future years of $2.6 billion in FY25 and $2.4 billion in FY26.
This partly reflects the trend in revenue growth, which is expected to be softer in the ‘out’ years and even decline in FY26 though that is largely matched by slower growth in government spending.
While the net operating balance of the general government sector stays in surplus out to FY28, a more comprehensive picture is provided by figures for the total public sector.
This includes capital investments by state-owned utilities such as Synergy, Western Power and the Water Corporation.
Including these numbers, the public sector’s total asset investment program is expected to increase to a record $10.6 billion in FY24.
It will increase further to $12.1 billion in FY25 before tapering off in the out years.
As a result, the public sector will record a cash deficit of $900 million in FY24 and will stay in deficit for the next four years.
The cash deficit is expected to be $3.6 billion in FY24 before peaking at $3.9 billion in FY25.
That flows through to the public sector’s net debt, which is projected to increase from $28.6 billion as at June 2024 to $40.9 billion as at June 2028.
As a share of gross state product, net debt will increase from 6.5 per cent as at June 2024 to 9.7 per cent as at June 2028.
Ms Saffioti defended the increase, saying it was less than the Barnett Liberal government had projected and was still affordable.
Based on past experience, the final outcome is likely to be better than these projections, in part because the budget conservatively assumes the iron ore price will revert to its long-run average of just $US71/t.
That is well below the current price of $US115/t, which flows through to the government in the form of royalties revenue.
