Department of Treasury and Finance Government of Western Australia Infrastructure and Fiscal Federalism CEDA Infrastructure Series Wednesday 21 September 2005 Timothy Marney Under Treasurer

Department of Treasury and Finance Government of Western Australia Overview Economic and fiscal outlook Public sector capital investment Public Private Partnerships (PPP) Policy Dealing with the Commonwealth –Poor deal for WA –Disincentives for development –Regulatory issues

Department of Treasury and Finance Government of Western Australia Characteristics of the State Economy Mining sector – 18.0% of State economy vs 4.5% nationally Population Growth – 1.6% vs 1.2% nationally Economic Growth – higher than national average 4.4% vs 3.9% over last ten years Per capita GDP 15% above national average Contributes 30% of Australia’s merchandise exports

Department of Treasury and Finance Government of Western Australia Economic Outlook for WA Actual Estimated Actual Budget Estimate Economic Growth (%) Employment Growth (%) (a) 2.0 Unemployment Rate (%) (a) 4.75 Wages Growth (%) (a) 3.75 CPI Growth (%) (a) 2.5 Figures sourced from the Budget Papers, ‘Economic and Fiscal Outlook’ (a) Outcomes

Department of Treasury and Finance Government of Western Australia Economic Growth Rates by Jurisdiction

Department of Treasury and Finance Government of Western Australia Business Investment Current and Prospective Investment Projects June 2005

Department of Treasury and Finance Government of Western Australia Net Operating Balance General Government

Department of Treasury and Finance Government of Western Australia Operating Revenue Growth General Government

Department of Treasury and Finance Government of Western Australia WA Capital Works Program

Department of Treasury and Finance Government of Western Australia Capital Works Program

Department of Treasury and Finance Government of Western Australia

Department of Treasury and Finance Government of Western Australia

Department of Treasury and Finance Government of Western Australia Capital Spend by Jurisdiction Data sourced from Australian Bureau of Statistics (catalogue )

Department of Treasury and Finance Government of Western Australia What Capacity Do We Have to Fund Infrastructure Financial Targets:  Net Debt to Revenue  Operating Surpluses Priorities arise during and outside the normal budget process. Around $2 billion in proposals in the pipeline and will need to be considered in the near future.

Department of Treasury and Finance Government of Western Australia Partnerships for Growth Public Private Partnerships (PPP) Policy Policy launch in December 2002 Document available on the Department of Treasury and Finance website at : The policy position is broadly consistent with other jurisdictions This topic was covered at the last CEDA lunch forum

Department of Treasury and Finance Government of Western Australia The Funding Task The infrastructure development funding task is relatively larger in Western Australia than nationally As the demand on State funds increases for large infrastructure projects, the Government will continue to explore PPPs as a procurement delivery option Commonwealth funding is also important

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Dealing with the Commonwealth Problems with structure of Federation Poor deal for WA on infrastructure Wrong type of C'wth project assistance Other disincentives for development – the Grants Commission Regulation Issues

Department of Treasury and Finance Government of Western Australia Fundamental Elements of Efficient Federalism Subsidiarity – authority exercised at the lowest level that produces efficient results Governments accountable to their electors Co-operation on national interests Clear roles for each level of government Financial independence Central government assistance that preserves State government motivations to perform

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia WA’s Contribution to the National Economy WA NT VIC NSW QLD SA TAS $2.6b $39.3b $9.6b $27.9b $20.8b $38.8b Goods and Services Exports $2.3b

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia WA’s Contribution to the Federal Budget WA $2,916m NT -$2,274m SA -$2,045m QLD -$3,067m NSW $4,831m VIC $2,572m TAS -$2,934m Net Fiscal Subsidy

Department of Treasury and Finance Government of Western Australia Poor Deal for WA Total Spending on Infrastructure (per capita) Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia

Department of Treasury and Finance Government of Western Australia Poor Deal for WA The Federal Government contribution to infrastructure funding is poor, particularly in regard to export related infrastructure where significant benefits from exports accrue to the Commonwealth. Engineers Australia, 2005, Western Australian Infrastructure Report Card The State Government is looking for a more mature partnership with the Federal Government in this regard and is pursuing a more cooperative approach.

Department of Treasury and Finance Government of Western Australia AUSLINK 10% of population 30% of exports 25% of National Hwys 8% of AUSLINK funding

Department of Treasury and Finance Government of Western Australia Poor quality in regional areas

Department of Treasury and Finance Government of Western Australia WA having to contribute to C’wth responsibility

Department of Treasury and Finance Government of Western Australia NWI mainly relevant to Eastern States water rights issues WA dam inflow fallen from 338 GL to 120GL

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia North West Shelf Royalties ( $563 million)

Department of Treasury and Finance Government of Western Australia CGC Does not recognise our spending on Burrup

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Who Benefits From Projects? TAS $11.88m NT $4.87m WA -$60.81m NSW $165.72m ACT $7.90m VIC $122.64m QLD $97.25m SA $37.47m Cwth m Net Benefits of Burrup Project

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Who Benefits From Projects? Net Benefits of Gorgon Project

Department of Treasury and Finance Government of Western Australia Wrong Type of Assistance Syntroleum GTL Resources Methanex

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Common User Water Supply Access Roads Company A Company B Company C Company D Company E Right Type of Assistance

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Disincentives for Development CGC aims to equalise States’ fiscal capacity, having regard to: –expenditure requirements; and –revenue raising capacity Commonwealth Grants Commission

Department of Treasury and Finance Government of Western Australia Access Regulation Centralised Light handed Decentralised Heavy handed Address in NCP review

Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Way Forward Need for Commonwealth to better understand WA needs Need for Commonwealth to better understand its interest in supporting WA Public debate to put pressure on Commonwealth Dialogue with Commonwealth

Department of Treasury and Finance Government of Western Australia Conclusion Massive development in WA WA major contributor to nation WA government doing all it can to provide necessary infrastructure Commonwealth must provide greater support Federal structures such as CGC must be reformed