2014 BUDGET BRIEFING - IPAA Western Australia Photos and Presentations/2… · Western Australia...
Transcript of 2014 BUDGET BRIEFING - IPAA Western Australia Photos and Presentations/2… · Western Australia...
BUDGET BRIEFING 2014
@ipaawa #2014BudgetBriefing
2014 – 2015 WA State Budget Dr. Simon Avenell Partner & PwC WA Government Leader PwC Perth
@ipaawa #2014BudgetBriefing
PwC
Context – A long view of the WA economy
2014-15 State Budget 3
May 2014
Total Australian population divided by WA population
1900 1930 1960 1985 2014
21 15 14 11 9
Source: ABS
PwC
Context – Projections for economic growth are bullish
FY15 State Budget 4
May 2014 Source: RBA
PwC
Context – Strong recent WA population growth
5 May 2014 FY15 State Budget
Source: ABS
0
5,000
10,000
15,000
20,000
25,000
30,000 Ju
n-81
O
ct-8
2 Fe
b-84
Ju
n-85
O
ct-8
6 Fe
b-88
Ju
n-89
O
ct-9
0 Fe
b-92
Ju
n-93
O
ct-9
4 Fe
b-96
Ju
n-97
O
ct-9
8 Fe
b-00
Ju
n-01
O
ct-0
2 Fe
b-04
Ju
n-05
O
ct-0
6 Fe
b-08
Ju
n-09
O
ct-1
0 Fe
b-12
Ju
n-13
Western Australia – Contributions to Quarterly Population Change (number)
Natural increase Net overseas migration
Net interstate migration
Western Australia – Population 2008 to 2013
Sept 2008 2.19m
Sept 2013 2.54m
Increase 16%
CAGR 3%
PwC
Estimates
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
General Government – Revenue and Expenses ($ million)
Revenue Expenses
Expense growth is placing pressure on the Budget
FY15 State Budget 6
May 2014 Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Estimates
0
500
1,000
1,500
2,000
2,500
3,000
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
General Government – Net Operating Balance ($ million)
Net operating balance flat
FY15 State Budget 7
May 2014 Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Estimates
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
Asset Investment Program ($m)
… and the need for infrastructure is driving increasing debt
FY15 State Budget 8
May 2014 Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Capital expenditure changes
FY15 State Budget 9
May 2014
• AIP lower due to completion of major projects, project delays
• A 5% reduction in the infrastructure programs of most agencies
• Additional AIP spending approved as part of the Budget includes:
− $147 million on school and State Training Provider infrastructure
− $113 million for Western Power in 2013-14 and 2014-15 to address safety priorities
− $85 million for major health infrastructure
• There is also the $1.6bn Roe Highway extension announced in the Commonwealth budget to be funded three ways, Federal, State and private
Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Revenue side changes
Revenue measure include:
• End to private motor vehicle registration fee concession ($189m)
• The Perth Parking Levy will increase by $365 ($73m)
• First home buyer transfer duty concession adjustments ($222m)
• An increase in land tax rates ($334m)
• Interim dividend for the State’s port authorities (FY15 $93m )
• Landfill levy increase ($202M)
Total impact
• $289 million in FY15
• $1,136 million across FY15 to FY18
FY15 State Budget 10
May 2014 Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Large agency expenditures grow in this budget
FY15 State Budget 11
May 2014
FY13 $b (%)
FY14 $b (%)
FY15 $b (%)
FY16 $b (%)
FY17 $b (%)
FY18 $b (%)
Health 6.9 (10.1%) 7.5 (8.7%) 8.0 (5.7%) 8.2 (3.4%) 8.5 (4.2%) 8.6 (0.7%)
Education 6.2 (4.8%) 6.5 (5.8%) 6.8 (5.2%) 7.2 (5.8%) 7.5 (4.0%) 7.9 (4.2%)
Public order and safety 2.9 (-2.4%) 3.1 (4.8%) 3.2 (3.7%) 3.3 (4.4%) 3.5 (4.0%) 3.5 (1.1%)
Other 9.5 (0.5%) 10.7 (12.9%) 10.5 (-1.5%) 11.1 (5.5%) 11.6 (4.0%) 11.9 (3.1%)
Total 25.5 (3.7%) 27.8 (9.1%) 28.5 (2.6%) 29.9 (4.9%) 31.1 (4.1%) 31.9 (2.5%)
Expenditure program changes – Actual and percentage change from previous year
Source: 2014-15 State Budget – Budget Paper No. 3
PwC
Estimates
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0
2
4
6
8
10
12
14
16 20
02-0
3
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
Real Per Capita Revenue and Revenue as a Share of GSP
Real per capita revenue ($) - RHS
Revenue as a share of GSP (%) - LHS
While Government’s capacity to pay for services is static
FY15 State Budget 12
May 2014 Source: ABS and 2014-15 State Budget – Budget Paper No. 3
PwC
Estimates
And revenue composition changes introduce volatility risk
FY15 State Budget 13
May 2014
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
General Government Operating Revenue ($m)
Other Interest income
Sales of goods and services Current grants and subsidies
Taxation revenue
Source: 2014-15 State Budget – Budget Paper No. 3
PwC
This increases the importance of budget assumptions
FY15 State Budget 14
May 2014
Assumption (FY15) Current rate Volatility
(last 12 months)
Exchange rate (US cents per AUD) 90.6 94.01 87 to 104
Iron ore price1 ($US per tonne) 122.70 103.50 103 to 142
Source: 2014-15 State Budget – Budget Paper No. 3; RBA current exchange rate 14 May 2014 and historical data; MacroBusiness iron ore spot price at 14 May 2014 and historical data.
1 Headline spot price minus the cost of freight
PwC
Small changes can make a big difference
FY15 State Budget 15
May 2014
For each US1 cent change in exchange rate:
-/+ $80 million revenue change
For each $US1 per tonne change in the price of iron ore:
+/- $49 million revenue change
Source: 2014-15 State Budget – Budget Paper No. 3
PwC
So can big changes!
FY15 State Budget 16
May 2014 Source: Commonwealth 2014 Budget Overview
0
5
10
15
20
25
30
35
40
45
FY13 FY17 FY21 FY25 0
5
10
15
20
25
30
35
40
45
FY13 FY17 FY21 FY25
Changed Commonwealth spending arrangements for schools and public hospitals
Old spending arrangements
New spending arrangements
Old spending arrangements
New spending arrangements
$billion $billion Schools Hospitals
PwC
Overall …
FY15 State Budget 17
May 2014
• Structural issues not yet addressed
• Perhaps positioning to do so
− Fiscal action plan
− Redundancy programs
− New wages policy
− Asset sales program
• Increased volatility exposure on revenue side
• Interesting times ahead in Commonwealth State relations
Done
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