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WA Budget 2023: Mark McGowan's third budget delivers another massive surplus for WA

Western Australia's position as the nation's strongest economy remains unchallenged, after Premier and Treasurer Mark McGowan handed down another massive budget surplus of $4.2 billion for the current financial year.

That figure is larger than the $4 billion federal surplus announced on Tuesday by treasurer Jim Chalmers, Australia's first surplus in 15 years. 

Delivering his third state budget as treasurer, and his government's seventh overall, Mr McGowan revealed the state's debt had again fallen, to $27.9 billion, although that figure is forecast to rise. 

Mr McGowan's headline cost-of-living relief measure was a $400 power bill credit to go to every household in the state, in a repeat of a $400 subsidy given out last year.

About 350,000 eligible households could receive an $862 credit on their power bill. 

The $4.2 billion final net operating surplus for 2022-23 is up from a forecast of $1.6 billion at this time last year, and $1.8 billion as recently as December.

Next year's surplus is forecast to be $3.3 billion.

Surpluses are expected to be maintained in WA for the next four years.

GST 'red line' warning 

Having enjoyed record surpluses in recent years stretching as high as $6 billion while other states languished, the premier has pre-empted this year's surplus being met with interstate complaints about WA's share of GST revenue.

A significant portion of Mr McGowan's budget speech to state parliament focused on warding off attempts to undo the 2018 GST reforms which guaranteed WA would receive 70 cents back on each dollar of GST paid.

Mr McGowan said he "took comfort" from assurances given by the prime minister and federal treasurer that there would not be a change, but he noted continued calls to unwind the reforms from other premiers and commentators.

Mark McGowan gets ready to deliver his third budget as WA premier.  (ABC News: Cason Ho)

"Make no mistake, anything less than the current 70 cent GST floor – rising to 75 cents in 2024-25 – would be contemptible and offensive," he said.

"Not just to this government, but to all Western Australians.

"It's a red line that should not be crossed by any future federal government."

Western Australia continues to receive the lowest return on GST of all the states.

Mr McGowan said the state would be increasing its funding for a team within treasury to "defend" WA's GST share.

"We have allocated funds to boost the dedicated team within treasury to safeguard our fair share," he said.

"Our very own GST fairness fighters."

Iron clad surplus

In handing down his December mid-year budget review, Mr McGowan had warned of a potentially tumultuous start to 2023 from a global economic perspective and the possibility of a drop in the iron ore price.

But the price remained strong and so royalties continued flooding into Western Australia's coffers.

WA's resources sector has underpinned the surplus.  (ABC News)

Asked whether the state's budget position was owed purely to iron ore royalties or strong financial management, the premier pointed to "tough" measures his government took after it was elected.

Mr McGowan credited his government's wages policy and ability to keep the economy open during the pandemic.

"My ambition was always to make sure WA was the strongest and most successful state in Australia and we are," he said.

Mark McGowan has delivered his third budget as WA treasurer.  (ABC News: Kenith Png)

Forty-five per cent of the value of national exports comes out of WA, and half of that goes to China, the majority of it iron ore.

WA enjoyed a total of $272 billion in exports over the year to March.

Forecast debt rise not guaranteed

Treasury in WA does not appear to take iron ore wealth for granted in its forecasts, however, with a conservative long-term price prediction of US$66.

This morning the iron ore price was US$106.

The treasurer said the "responsible" conservative iron ore forecasts were to blame for forecasts of debt rising in the coming years.

Mark McGowan's third budget as WA treasurer saw the state's debt fall to $27.9 million.  (ABC News: Cason Ho )

WA's debt for this year was $27.9 billion, down from a forecast of $31.1 billion.

In successive budgets there have been forecasts of state debt rising, but each time reality has shown debt coming in a few billion dollars lower than predicted.

Mr McGowan said this year's debt repayments would save the state $4.3 billion in interest payments.

All WA households get power bill relief 

The $400 power bill subsidy will come in two instalments of $200 — contributing to households' July/August bill and then their November/December bill.

West Australians are going to get a $400 credit on their power bills.  (ABC News: James Carmody)

It comes on top of the state going halves with the Commonwealth on an additional $350 subsidy for those in need announced in the federal budget on Tuesday.

It means about 350,000 households eligible for the indexed Energy Assistance Payment stand to receive a total of $826 in power bill relief for the financial year.

Much of the budget spend had already been announced by government in a steady stream of pre-budget press conferences in recent weeks and months.

Focus on health system

One of the state government's key challenges in recent years and a consistent focus of its budgets has been the health system.

It was one of the largest parts of the budget again this year with $2.7 billion in additional spend on health and mental health included.

$1.2 billion is going towards major public hospital infrastructure projects, while $544 million over the next four years will go towards the new Women and Babies Hospital to be built next to Fiona Stanley Hospital at Murdoch.

The state government has committed $2.7 billion to improve health and mental health facilities in WA.  (ABC News)

There will also be $420 million for mental health, $218 million of which will be used to redevelop and expand the Frankland secure forensic mental health facility at Graylands Hospital.

Millions for housing

The state government has also focused on funds promised to boost general housing supply and social housing.

The budget includes another $450 millions, announced in recent weeks, to build another 700 social homes.

That latest funding, however, comes with no set deadlines or timelines, but the government has said it will ensure a pipeline of new social homes and continued construction work in the state.

The state government has already announced a commitment to boost social housing.   (ABC News: Keane Bourke)

There is also $47.6 million set aside to expand the home building workforce and to try to ease a backlog of delayed home builds, while $49 million will go towards 100 social homes for rough sleepers in regional WA.

Electricity network improvements

One of the government's headline announcements on the morning of its budget was a 500-megawatt battery planned for the town of Collie.

Collie is home to Western Australia's last remaining coal mines and state-owned coal fired power stations, which are set to be retired by 2030.

That battery is set to be funded out of $2.8 billion set aside for the opening phase of a 'green energy transformation' for the state.

Collie will be home to a 500 megawatt battery, similar to this one in Geelong.  (Supplied: Victoria Department of Energy, Environment and Climate Change)

That funding will also cover a 200 mega-watt expansion of a major battery project underway in Kwinana in Perth's South, which is expected to be switched on for the first time in coming weeks.

Economic diversification a priority

An investment of $10.1 million for a new trade office in Austin, Texas was among the government's flagged 'economic diversification' measures.

The budget trumpets $463 million going towards diversifying WA's economy for 'the future'.

WA's power grid is being transformed towards renewable energy.  (ABC News: Kenith Png)

Other spending under that umbrella includes $15 million to attract major events to WA to help the business and tourism sectors.

There's also $13.1 million to support student welfare and build a 'pipeline of future international students'.

A 'New Industries Fund' to boost innovation and attract entrepreneurs will get $9.1 million.

More infrastructure funding

The state's enormous infrastructure program continues with $39 billion in projects across the forward estimates, with a huge slab of that going towards Metronet projects.

But Mr McGowan said there were no new delays to major road and transport projects that had not already been revealed hidden within this budget.

Wage growth to overtake inflation

The state government has been quick to point to Perth now enjoying the lowest inflation rate of the capital cities.

But at 5.75 per cent it is still high historically, however in the coming years the budget forecasts that will improve, and in four years' time inflation is set to reach 2.5 per cent.

From next financial year though, wages growth is anticipated to overtake inflation, delivering West Australians their first real wage rises in years.

West Australians are still dealing with cost of living pressures.  (ABC News: Claire Moodie)

Coming in lower than inflation this year, but still rising by 2.4 per cent, will be household fees and charges.

Asked whether his government could have done more to ease cost of living. Mr McGowan said his government was using its economic situation to tackle a number of priorities at the same time in a "responsible and sensible" way.

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