Premier Mark McGowan has foreshadowed a grim outlook for Western Australia’s economy as he announced a $1.8bn surplus for the next year.
The projected net operating surplus revealed at the mid-year economic review is far lower than the record $6bn surplus in 2021-22.
Mr McGowan said it was partly due to a lower iron ore price, the impact of the state government’s wages policy, spending carried over from the previous year, and additional resources for priority services and infrastructure projects.
The Covid-19 pandemic and situation in China were also factors.
“They (China) purchase a lot of our products for their property sector … the predictions there are fairly stark in terms of decline in activity,” Mr McGowan told reporters on Thursday.
Mr McGowan said the global economic outlook had deteriorated and there was a likelihood of a recession next year due to climbing interest rates, a “hangover” from Covid-19 and spending patterns across the world.
“It’s anticipated to be a difficult period in the year or so ahead,” he said.
WA’s economy is forecast to grow by three per cent this year, up from two per cent predicted at the May budget.
Unemployment is tipped to average 3.5 per cent in 2022-23, down from 3.75 per cent forecast at the budget.
Net debt is forecast to remain relatively stable over the forward estimates, having been revised down by $1.5bn to a projected $29.6bn by June.
The mid-year review also included a $35bn infrastructure program through to 2026.
An extra $667m has been set aside for Perth’s third desalination plant.
The struggling health system will also get a $511.5m injection to connect patients with specialist care and for more initiatives to improve patient flow in emergency departments.
It also includes funding for health and medical research, ICT initiatives to address cyber security, and funding for the Bunbury Hospital redevelopment.
Mr McGowan said the pandemic showed the government needed to have some financial capacity to respond to “whatever the world throws at you”.
“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,” he said.
But Shadow Treasurer Steve Thomas said Mr McGowan was hiding “massive wealth”, including higher than forecast iron ore royalties.
“Mark McGowan has been talking down the economy because he wants to frighten us all with an impending recession,” he told reporters.
“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.”