Premier Mark McGowan has painted a bleak picture of what's ahead for Western Australia's economy as he announced a $1.8 billion surplus for the next year.
The mid-year review surplus is slightly above what was predicted for the 2022-23 period in May's budget, but significantly below the record $6 billion the government had in its pocket last financial year.
Mr McGowan said while that was partially down to iron ore royalties falling off as the resource's price dropped, other sources of government income like payroll tax would increase.
That, combined with an extra $2 billion spend this financial year – as part of a total of $4.8 billion over coming years – has reduced the money the state has left over.
About a quarter of the extra spending this financial year is a result of the state government's latest wages policy, which has so far failed to appease police and nurses.
Over the years ahead, an extra $412 million has been set aside for new projects in the electricity system, including wind farms and batteries, with about half-a-billion dollars of interest payments added to the government's expenses.
State can't afford to pay nurses more: Premier
The Premier continued to insist the current public sector wages policy, which delivers pay rises of between about three and seven per cent, was all the budget could sustain.
He said it was a "generous" increase, and that anything further would have a "significant impact" on the state budget.
Under Treasurer Michael Barnes said any further increases would "go straight onto our debt and drive up our interest bill".
Mr McGowan said it was critical that money was instead kept on hand to weather looming storms.
"By staying in surplus we have capacity to respond to what might occur next year and years after, in terms of impacts of what's happening around the world," he said.
"What COVID showed is that you need to have some financial capacity to respond to whatever the world throws at you."
No indication of potential financial help
In the early days of the pandemic, the government invested significantly in infrastructure projects in a bid to keep the economy afloat, amid what Mr McGowan said were predictions of a "great depression".
But with the state's construction sector now overheated and constrained by a short supply of labour, he said little about what levers the state government had left to pull if it had to give further support.
"It all depends on what's required, I don't want to go into hypotheticals," the Premier said.
"You saw over COVID we did things to support households and businesses as well, so we just need to retain capacity in case something comes at us."
Shadow Treasurer Steve Thomas said there was little room for Mr McGowan to spend more money if he needed to.
"The construction market is overdone, and Mark McGowan in government is competing with the private sector to deliver infrastructure," he said.
Mr McGowan said while WA was expected to perform "relatively strongly" amid pessimistic global economic outlooks, predictions around China's economy remained a cause for concern.
"They purchase a lot of our products for their property sector … the predictions are fairly stark in terms of decline in activity," he said.
Those negative outlooks on China were shared by the state's under-treasurer, Michael Barnes.
"When you look at the dynamics of the property market in China they're pretty dire," he said.
Mr Barnes said that, combined with China's softening COVID-zero policy, which he is concerned will lead to significant economic impacts when the virus is allowed to spread, contributed to the budget's estimates on iron ore prices.
In May last year, it reached a record high of $US240 a tonne, but the government expects it to average around $US87 this financial year, before falling to the long-term average of $US66.
The Premier said there were good signs for the state's economy, including a 3.5 per cent unemployment rate, the highest participation rate of all the states, and "extraordinarily strong" retail trade.
Premier accused of 'trying to hide' riches
Mr Thomas said Mr McGowan was "trying to hide" his riches, including higher than forecast iron ore royalties this financial year.
"Mark McGowan has been talking down the economy because he wants to frighten us all with an impending recession," he said.
"Everybody expects the world economy to be resilient, we're looking at a softer landing here than anywhere else.
"But Mark McGowan wants to keep the money for Mark McGowan and not share it with the people of Western Australia.
"He has massive wealth, he would be able to invest that for better services for the people of Western Australia."
Dr Thomas said the Premier was using "tricky accounting" to reduce the size of this year's surplus and save it to spend in the future.
He continued to call on the government to instead pursue reforms to things like payroll tax and stamp duties, as well as paying down debt.
Net debt is predicted to dip to $29.6 billion this financial year, before rising over the following three years.
"Mark McGowan inherited $32 billion worth of debt, and at the end of the biggest boom we have ever seen, will again have $32 billion worth of debt," he said.
The Premier said while net debt was predicted to increase again, it was a result of cautious budgeting, which took a "pessimistic" view of iron ore.
More money for hospitals
The mid-year review also contained extra money for the state's still-struggling health system, including $27 million to improve access to emergency care, $78 million for the redevelopment of Bunbury Hospital and $80 million for ICT-related infrastructure.
Australian Medical Association WA president, Mark Duncan-Smith, said the extra money was welcome, but may result in little change.
"In an ideal system, our bed occupancy in the hospital should be 85 per cent," he said.
"Even if these new measures reduce occupancy by one to two per cent, we'll still be in the high 90s, and therefore still have all of those problems.
"I again call on the McGowan government to adopt a policy to reach and maintain the national average of beds [per capita] for the people of Western Australia."
