Heroic measures to repair the State Budget could end up damaging consumer and business confidence, warns Eric Ripper
Former WA treasurer and deputy premier Eric Ripper says despite the State Government’s best efforts, WA may be in a worse deficit and debt position come State Budget day on September 7.
Ripper, who is now chairman of independent strategic advisory firm GRA Everingham, agrees with CCI’s position that the McGowan Government will need to be wary of any budget repair measures that may be detrimental to business or consumer confidence.
He says even to return to the budget position outlined in the pre-election financial projections forecast, the Government has to actually deliver on the savings in-built into the forward estimates by previous treasurer Mike Nahan.
“These have not yet been delivered. It also has to overcome horrendous losses of revenue since the election, amounting to billions of dollars over the forward estimates,” he says.
“I would expect the Government, given some of its announcements, will have made quite heroic attempts at savings but will still not be able to overcome the loss of revenue since the pre-election financial projections statement.
“In other words, I’m actually expecting that despite the Government’s best efforts, the deficit and debt position may be worse.”
Ripper says the health budget is the greatest ongoing threat to financial sustainability in Western Australia.
“The Government will need to be giving enormous attention to how to match community expectations and the pressures on the hospitals with financial sustainability,” he says.
With a soft economy, the other difficulty faced by the Government is conflict between its responsibility to repair the budget while promoting economic growth, Ripper says.
“It will have to be careful about any measures it takes to repair the budget which may impact on business and consumer confidence.
“It’s a fine balance. Heroic measures to repair the budget could end up damaging consumer and business confidence and having a counter-productive effect even on the budget in due course. We don’t want that.”
Ripper says the budget will define the character of the new Government.
“How people choose to spend the money is a very important indication of their values and priorities,” he says.
“I think the Government has been travelling well and the ministers have been making responsible decisions in fiscal terms, but the Government faces extremely difficult circumstances and no doubt will be appealing to all sections of the community to take a share of the responsibility and the pain.”
With more than 25 years’ experience in politics including overseeing eight state budgets between 2001 to 2008, Ripper says it may not all be bad.
“Treasurers do find that there may be more capacity to get important things done when there is a financial crisis then when there is not,” he says.
CCI Chief Economist Rick Newnham has urged the McGowan Government to not introduce any measure or policy that would dampen business confidence or deter economic growth such as new or increased taxes, fees or levies on business.
Newnham says payroll tax is a roadblock to employment, particularly for businesses approaching the tax-free threshold, and any increase to this tax burden will cost jobs.
“We know that compared to other states, WA’s tax regime is appropriate, but spending under the former government was completely out of sync with its revenue,” he says.
“That is why to fix the Budget the State Government must reduce spending to its pre-boom size to pay down the State’s $42 billion debt and regain its AAA credit rating.”
►Hear Ripper and Newnham unpack the budget at the Post State Budget Breakfast on September 13.