Iron ore bonanza puts McGowan Government in the black
Western Australia is expected to become the only state to forecast a surplus this year on the back of soaring iron ore prices.
Western Australia is expected to become the only state to forecast a surplus this year on the back of soaring iron ore prices when the McGowan Labor government unveils its fourth budget on Thursday.
Months of climbing iron ore prices gave WA a $1.7bn surplus in 2019-20, according to the McGowan government’s figures released on September 25.
WA Treasurer Ben Wyatt has declined to say whether he will forecast a surplus for 2020-12 although elevated iron ore prices — and disruptions to Brazil’s iron ore sector — have led to predictions WA is headed for a modest surplus.
This is after the state government committed more than $6bn to COVID recovery measures such as business grants and household subsidies. Since June, household fees and charges have been frozen and the emergency services levy waived but on Sunday Premier Mark McGowan announced the biggest household concession yet: every household in the state will get $600 in free power from November 1.
The gift is not means-tested and based on average household power bills in WA, it means many families will not pay for power in the four months leading up to the next state election on March 13, 2021.
The McGowan government will pay for this using a $665m payout from the long-running, almost $2bn legal brawl over Alan Bond’s failed Bell Group.
WA Chamber of Commerce chief executive Chris Rodwell on Sunday urged the McGowan government to use its good financial position to foster investment.
“It is rare to secure a budget surplus during an economic crisis, and it poses a conundrum for the WA government. States like NSW and Victoria are expected to report multi-billion-dollar deficits,” he said.
“There have been calls for the government to expend any surplus funds in this year’s budget, but the best approach is to invest in strengthening the economy overall and fostering businesses investment.
“While certain data shows some recovery in the WA economy, we need to be mindful of economic headwinds that await us.
“We still face the prospect of serious unemployment issues, especially as our businesses inevitably transition off federal stimulus. As Reserve Bank governor Phillip Lowe noted, any additional fiscal stimulus should come in the form of a more efficient or competitive taxes, which would invigorate the whole economy and support the creation of more jobs and opportunities for West Australians.”
Mr McGowan said the bill relief would allow families to spend money in the WA economy in the lead-up to Christmas.
“Earlier this year, there was grave concern about the health of West Australians and of our economy,” he said.
“There was grave concern that we would go into a depression in WA and Australia.
“The good thing is we have avoided that, but we are not out of the woods yet.”
Mr McGowan said on Sunday he would take down the state’s interstate border on health advice only, which was currently that it would be safe to open WA to the rest of Australia after other states and territories had recorded no COVID community spread for 28 days.
He has denied economic considerations, after an outburst on Thursday in which he accused other states of wanting WA open so that high-earning residents would leave the state and spend money elsewhere.
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