Western Australia delivered its first budget post the downturn in the mining sector yesterday with a $239 million surplus for the year ending June 30.
The Liberal government predicts a surplus of $386 million this financial year, a deficit next year, and job cuts in the public sector as spending gets slashed.
Economists are unhappy with the budget outcome with AMP Capital chief economist Shane Oliver saying the state should have had a healthier surplus with little debt on the back of the mining boom.
“WA has gone through the biggest mining investment boom in its history. It is disappointing to see public finances aren’t in better shape,” he said.
Other economists said the government wasted the mining and energy boom by letting the public sector debt to burgeon to an estimated $28 billion by 2017.
Western Australian Premier Colin Barnett recently said the golden days of the iron ore boom in WA have finished.
The state's mining industry said job cuts and fluctuating resource prices are common in the mining industry. The Chamber of Minerals and Energy's Sarah Hooper is hopeful for the sector as it moves from a construction to an operations phase.
The budget is poised to slip to a $147 million deficit in 2014/15. Treasurer Troy Buswell attributed this to lower income from GST
The ratio between debt and revenue will peak to its biggest level since 1994-95, The Australian Financial Review reported.
Buswell said this was due to the end of the mining investment boom that peaked last year.
“That business investment will decline over the next few years. This has a significant impact on state economic growth,” he said.
He still remained optimistic about the state’s position.
“People who believe that this drop in business investment means [the WA economy] will drop off the precipice are wrong,” he said.
Iron ore royalties is predicted to bring in $5.2 billion this financial year and is poised to climb to $6.1 billion in 2016-17.
The rise in iron ore fines royalty rates and budget cuts in the public sector will increase revenue by 8.9 per cent in 2013/14, Business Spectator reported.
The WA economy is predicted to grow by 3.25 per cent this financial year, short of the 5.75 per cent growth in 2012-13.
Merill Lynch senior economist Saul Eslake said recently WA is edging towards a recession as unemployment climbs.
Macquarie WA chairman Mark Barnaba was satisfied with the budget.
“So we are forecasting 3.5 per cent [economic] growth and not six per cent and unemployment has been lower but we are still predicting a surplus and state is still in a very good position,” Barnaba said.
“If you look at what the money is being spent on, it is on productivity enhancing infrastructure. It is not just about whether you are taking on debt but whether you can afford it and is it being invested in productive assets?”
Australian Mining reported in May the state's jobless rate hit GFC highs, reaching 5.2 per cent in April, up from 4.8 in March.