The Shadow Treasurer Dr Steve Thomas says that the 2020-21 Annual Report on State Finances released today has highlighted the massive cash income the McGowan Government has received, which was understated in the state budget delivered only two weeks ago.
“The incredible $5.6 billion surplus in 2020-21 recorded in the budget papers has been “corrected” to $5.8 billion in the Annual Report” Dr Thomas said. “This has now become the biggest surplus of any state in Australia’s history, and represents a high water mark we are unlikely to ever see again.”
The correction has been attributed to a $213 million lowering of expenses thanks to a variation in accounting practices for native title settlements.
“The current once in a lifetime fiscal boom remains the biggest lost opportunity the state has ever seen.”
“When you add the 2020-21 surplus to the $4 billion the Government received over and above its earlier budgets and the very conservative $2.8 billion surplus predicted for the current year, it is a $12.6 billion mountain of cash that Mark McGowan is already sitting on.”
The massive increase in state revenue is attributed to:
- the high iron ore price resulting in massive iron ore royalties – to a peak of $12 billion in 2020-21 which is more than double the amount expected in a normal price year,
- higher payroll and land taxes, up $1.1 billion on 2019-20, including payroll tax which is up by$314 million or 8.4%, transfer duty which is up 58% or $770 million, and
- the GST fix put in place by the Federal Government which added $1.5 billion to the state coffers last financial year and $1.85 billion this year.
“The Government is expecting to have budget surpluses totalling $15 billion over the five years from 2020-21 to 2024-25, an unprecedented mountain of wealth” Dr Thomas said.
“Over that period however the total net debt of the state will not decline. Instead, it will rise from $33.5 billion at the end of last financial year to $36 billion in 2024-25.”
“At a time of wealth previous Governments could only dream of the McGowan Labor Government will have $15 billion in surpluses and still go out and have to borrow another $2.5 billion” Dr Thomas said.
“On the revenue side the Labor Government has been the beneficiary of the biggest boom in our history, but you have to ask how well the community has benefitted from this boom which commenced two and a half years ago and is still going today” Dr Thomas said.
“How can we have a health crisis, a housing crisis and a skills crisis after thirty months of boom that has poured rivers of gold into Labor’s treasury.”
“It is not the case that this wealth arrived recently, so there is no excuse for the service delivery crisis position we now find ourselves in.”
Dr Thomas said that the once in a lifetime series of surpluses should be used to set the state up for the future.
“The Government should have been positioning the state for the end of the current boom so that when we return to normal economic circumstances we can still thrive” Dr Thomas said. “We have had a one-off opportunity to reform taxes and approvals processes to help businesses here grow, and it is disappointing that the Government not grabbed it with both hands.”
“That opportunity is already starting to wane.”
”The iron ore spot price has already fallen below the level of the assumptions that underpin the state budget handed down just one week ago” Dr Thomas said. “The current price is half the May 2021 peak of US$235 per tonne, and the drop has occurred within just 4 months.”
“Importantly, the iron ore price has already dropped below the state budget iron ore assumption for the full 2021-22 financial year of US$121.30 per tonne.”
“There has been a small recent rally, but if the decline continues the budget forecast for this year is under threat effectively from day one.”
“In particular there will never be a better opportunity to reform payroll tax, because the upfront cost of reform is high and can only be done in times of plenty like we now enjoy.”
“Sadly, the Labor Party has avoided any significant reform of tax despite having the best opportunity in history to do so” Dr Thomas said.
“Where is the vision for tax reform, or economic diversity and growth?”