Hon Mike Nahan BEc MS PhD MLA — Budget challenges ahead for Western Australia

The decision by international credit ratings agency Moody’s today to downgrade Western Australia’s credit rating from Aaa (negative outlook) to Aa1 (stable outlook) follows a similar decision by Standard & Poor’s (S&P) in September last year.

“This decision is disappointing, but as we have said many times recently, the Government is determined to regain the State’s triple-A credit rating,” Treasurer Mike Nahan said today.

“We don’t anticipate any significant increase in the cost of borrowing as the lower credit rating was factored into the forward estimates at the time of S&P’s rating action.”

The Government has demonstrated its commitment to addressing the structural challenges facing the State’s finances – which include rapidly declining GST revenue and unprecedented demand for government services and infrastructure from strong population growth – through the $8.6billion Fiscal Action Plan announced in the 2013-14 State Budget and expanded in the recent mid-year review, and in the revenue and savings measures implemented as part of the 2014-15 Budget.

“This highlights what the Liberal National Government has been saying for the past five years, that the GST system is broken, the State is increasingly relying on volatile iron ore revenue because the Commonwealth is redistributing GST revenue to other States,” Dr Nahan said.

“This is clearly unsustainable and I call upon my colleagues in Canberra to work with me in addressing this situation immediately.”

The distribution of the GST for Western Australia has fallen from a return of 93 cents per $1 collected in WA in 2007-08 to just 37 cents in 2014-15.

The Treasurer said the State Government was well on the way to delivering successive rounds of announced reforms with a new wages policy for public sector employees taking effect in November 2013; the Workforce Reform Act 2014 passing the State Parliament in May; the passage of amendments to revenue legislation and other savings measures written into agency budgets; and the establishment of an Asset Sales Taskforce to begin a co-ordinated and structured process of asset sales.

“These policies demonstrate the State Government’s commitment to addressing the structural imbalance in the WA Budget,” Dr Nahan said.

The Treasurer said further measures would be considered in the forthcoming mid-year review and in developing the 2015-16 Budget.

Dr Nahan said that net debt had risen in recent years because borrowings were required to help fund the State’s significant infrastructure requirements.

“These levels of net debt remain affordable and Western Australia’s debt levels compared favourably with other Australian jurisdictions,” he said.

“The State Government has embarked on an infrastructure investment program that is fundamental in meeting the needs of the State’s growing economy and population. Without this investment there would be a very real risk that the State’s existing assets would be unable to cope with the strong demand for public infrastructure.”