Rita Saffioti’s pre-Christmas boast that WA’s economy was the “envy of the nation” is just the sort of thing to provoke a renewed round of GST bashing from other Labor Treasurers.
Even though WA’s hater-in-chief — Victorian Treasurer Tim Pallas — has pulled up stumps, having run his State’s finances into the ground, there are plenty of others lining up to fill his spot.
Saffioti’s braggadocio immediately led to a critical article in The Australian Financial Review pointing out that the WA deal was now a $54 billion burden on the Federal Budget in compensation payments to the other States.
Anthony Albanese isn’t quite silly enough to move on WA’s GST share before the looming election, but if he makes it back into government dependent on the Greens for support, the pressure will be irresistible.
With WA headed to the polls in March, Saffioti’s electoral instincts kicked in when she presented the mid-year economic statement on December 23, patting herself on the back so hard she risked suffering a slipped disc.
While any Treasurer would make the most of an increased surplus, Saffioti’s numbers are far from good considering the windfall revenues she enjoys. The document got limited scrutiny.
Once again, the trick of writing into a Budget a lower-than-credible iron ore price produced the illusion of an increased surplus — just before an election. Saffioti’s first Budget last May had the price at a laughable US$75 a tonne when months earlier it was selling for US$144.
It was adjusted in the mid-year review to US$95.3 to create the windfall and then drops to US$71 in following years. The effect of that deliberate under-estimate was to conjure a $1.7b increase in iron ore royalties, pushing the pre-election surplus from $2.6b to $3.1b.
But when you consider Saffioti also got a windfall $1b increase in stamp duty and car registration fees, simple arithmetic shows that her spending must have gone through the roof to produce only a $500 million increase in the surplus.
And sure enough, the fine print shows spending — which the States have been told to reduce to help the fight against inflation — blows out from the Budget estimate of $43.6b to $45.9b.
But even that profligacy doesn’t tell the full story. The actual outlays in the previous Budget were $41.4b.
So that’s an increase in Labor’s spending of 10.8 per cent. You read that right: double-digit, inflation-boosting excess.
And Saffioti has the gall to boast about sound economic management. She delivers bloated ‘Big Government’.
“The West Australian Government said in its mid-year Budget update on Monday that it expected to receive $32.4b in GST revenue to 2027-28,” the AFR reported just four days after Saffioti’s boasting.
“Independent economist Saul Eslake, a leading critic of the West Australian GST deal, said the figure was $21.1b more than the State would have received under previous distribution arrangements.
“Mr Eslake said that the total cost of the GST deal was now likely to hit $54b by 2029-30.
So the Morrison Government’s GST deal has made the WA Labor Government look $21.1b better at doing its job. For doing nothing.
The AFR pointed out that all other States and Territories expect to be in deficit over the next four years, while WA predicted thinning surpluses.
West Australians should expect the worst when the GST deal comes up for a full review next year. WA’s case is getting weaker.
Not only has Saffioti allowed spending to blow out, she has consequently not done what prudent treasurers do with windfall revenues: pay down debt.
In fact, the mid-year review shows WA’s total public sector net debt increasing from last year’s $28.2b to an estimated $39.6b in 2026-27.
So while the iron ore goose has continued to lay golden eggs for Saffioti, she has turned them into an increasing debt burden, pushing it up as a proportion of gross State profit from 6.2 per cent to 9 per cent.
In anyone’s book, this is bad financial management from an administration awash with revenues and “the envy of the nation”.
Consider this from the review: “The State’s mining sector contributed nearly 50 per cent of total economic output in 2023-24 and remains WA’s largest full-time employer.”
So when mining goes flat, so do we. And Saffioti is unprepared for a downturn — and has left WA exposed.
“The Cook Labor Government’s strong financial management has allowed us to maintain our record investment in infrastructure and housing, along with new energy decarbonisation initiatives,” Saffioti preened when announcing the figures.
She claimed “our Government has driven debt down and positioned our State to have what are now the strongest economic and financial numbers in the nation”.
Really? After this year, the figures show WA’s debt again rising strongly. As a former Treasury officer, she knows it, but pretends the opposite.
Pants on fire.
Saffioti’s claims were also starkly at odds with the Australian Bureau of Statistics’ national accounts for the September quarter, released at the start of last month.
Far from WA leading the nation, we were ranked only third in growth, behind the ACT and South Australia in what is known as State Final Demand, which measures economic activity but strips out trade, providing a focus on the real local business economy.
The only thing that kept WA in the middle of the pack was the biggest increase in Government spending of any jurisdiction.
The sobering reality in those national figures is that the non-Government economy in WA went backwards faster in the September quarter than anywhere except the moribund Northern Territory.
The private economy grew by 1.8 per cent in Tasmania and 1.5 per cent in South Australia, but declined 2.2 per cent here. Businesses are suffering.
Government spending in WA in the quarter was up 3.5 per cent, but just 0.8 per cent in SA and zero in Tasmania, the only Liberal-run State in the nation.
So all that money Saffioti has poured into Metronet is propping up an otherwise pretty sad local economy.
Saffioti also needs reminding that the Business Council of Australia’s comparative review of the nation’s regulatory and tax settings, released a month ago, placed WA second last, just above Victoria. South Australia and Tasmania led the way.
That review painted the picture of WA as a reform-lazy State, fat and complacent on mining revenues, scoring particularly badly on costs and over-regulation.
And there are other troubling matters emerging from WA’s mid-year review that cannot be glibly dismissed.
Premier Roger Cook incessantly promotes his vision of WA as a “global renewable energy powerhouse” based on the illusion of green hydrogen and the critical minerals needed for batteries, principally lithium and nickel.
But the global commodities markets have a different idea, with prices for those minerals crashing as the “renewables revolution” runs smack into financial reality.
The review writes down lithium royalties in the Budget by $672m, while Labor shovels $150m to the commodity’s producers in industry assistance.
Nickel royalties are reduced by $240m thanks to the Chinese-backed “dirty” nickel coming from Indonesia. If Labor hadn’t wrecked our trade office in Jakarta, WA would have had much better intelligence about the emerging threat to our local nickel industry.
And maybe such rosy royalty estimates wouldn’t prop up the Budget figures.
We’ll be relying on iron ore for a long time yet. And WA will remain vulnerable to its fluctuations.
Faced with this mountain of political ammunition from the mid-year review, the Liberals went for the wrong target.
The best Libby Mettam could do was label Saffioti as a Christmas grinch for properly not offering up more cost-of-living handouts after ruling out another power bill credit before the election.
Shadow Treasurer Steve Martin finally got on message four days later in an op-ed in this newspaper: “Tucked away in the fine print of the review is an extra and unbudgeted $1b of additional fees and charges on WA families and small businesses.
“More than $700m came from the taxes like stamp duty, and insurance duty, with another $300m ripped from households paying rego, and the other costs that come with keeping the family car on the road.”
The public needs to understand that using taxpayer funds to pay household power bills is just a round-robin scam that sends the cash straight back to the Government through State-owned utilities. But it doesn’t make electricity cheaper.
True cost-of-living relief — which might come from real tax reform — would involve things like lowering stamp duty and car registration fees.
For example, in WA the stamp duty on general insurance is charged after GST, which is a double-taxing rort. Soaring insurance costs are hurting families and fuelling inflation.
The Liberals will need to produce a realistic and pertinent cost-of-living strategy for WA voters who are being deceived about the true nature of this State’s future finances.