The WA government has revised its 2011-12 budget forecast downwards … by more than 50%:
The West Australian government has slashed its projected surplus by more than $200 million because of risks in the global economy, weaker royalties, a weak housing market and the high Australian dollar.
WA is expected to record a $209 million surplus, making it the nation’s highest surplus for 2011-12.
But the projected surplus is significantly lower than the $442 million forecast at budget time.
The figure was released on Wednesday as part of the Liberal-National government’s mid-year review.
Treasurer Christian Porter said there had been many changes to the global economy since the May state budget.
“There’s been one single unanticipated economic phenomena that has occurred since the time of delivering the budget in May, which has had a very significant impact on the WA state economy – that is the events that are unfolding in Europe.
“It is self-evident that what’s going on in Europe is very serious.”
Mr Porter said the European sovereign debt crisis and a slower than expected recovery in the US economy had been major factors in the revised estimates.
He said the royalty revenue had been revised downwards to $970 million over the budget and forward estimates period because of a higher $US/$A exchange rate and the impact of lower iron ore, oil and base metals prices.
Mr Porter said that while the European Union accounted for just six per cent of WA’s merchandise exports, it provided 20 per cent of China’s exports, which could affect WA.
He said that if conditions in Europe worsened and negatively affected the availability and cost of credit, major resource projects in WA could be delayed.
… the housing market remains weak with both house prices and sales volumes lower than the budget forecasts.
And the future beyond the next 6 months?
Budget surpluses are still forecast until 2013/14 though these too have been revised significantly downwards.
Softening iron ore prices over the last six months have hit the State Government’s revenue projections hard, with Treasurer Christian Porter forecasting an almost billion dollar drop in mining royalties in the state over the next four years.
Speaking to reporters today Mr Porter said the government has slashed $951 million from its projections of mining royalties, with almost $820 million coming off iron ore royalties alone over the next four years.
This is despite the State Government increasing royalty rates on fines iron ore from 5.25 per cent to 6.5 per cent from July next year, and up to 7.5 per cent from the following financial year.
The State Government’s mid year financial review forecast a steady fall in iron ore prices over the next four years, however, following sharp falls in spot prices earlier this year as uncertainty over European debt and the health of the Chinese economy hit markets.
So, our “boom” state is now expecting a bust.
What was it that Senator Joyce said in response to the Federal government’s “truly extraordinary” May budget forecast?
Opposition frontbencher Barnaby Joyce has taken a swipe at the Gillard government’s approach to the economy, saying it had an unbounded belief in Asia’s demand for Australia’s resources.
“God help you when the prices go down,” he told reporters in Canberra on Wednesday.
The government’s approach to economics was “a clever ability to charge people to dig up red and black rocks.”
“They (government) have an unbounded belief that the people in South-East Asia will have an eternal gratitude to pay an excessive price for red rocks and black rocks.”
And what did he say in September (a must-read)?
Australia avoided recession because of the export of red rocks (called iron ore) and black rocks (called coal) in record volumes at record prices, record shipments of wheat, a 425 basis point drop in interest rates and a comparatively low dollar.
Wayne Swan likes to regularly point to Australia’s $400 billion investment pipeline but he doesn’t control that. That is a promise of someone else’s benevolence. What he does control is the public sector debt and it is going through the roof.
Barnaby was right.
Now, about that
revised fudged $1.5bn Federal government budget surplus, forecast for 18 months away.
Wayne? … Wayne?!?!
Oh, of course. Silly me. We don’t need to hear it again.
We all know the mantra by now:
“Our economy has blah blah strong fundamentals blah blah low debt blah blah trend growth blah blah a huge investment pipeline.”