BUDGET: COVID-19 has become endemic in this year’s state budget, with a potential outbreak hanging bleakly over the state’s economic and fiscal outlook.
COVID-19 has become endemic in this year’s state budget, with a potential outbreak hanging bleakly over the state’s economic and fiscal outlook.
Treasury has estimated GSP growth of 3.5 per cent this financial year, tapering off to just 1.25 per cent growth in the following period on the back of a decrease in stimulus-induced activities as well as a fall in net exports.
Modelling of the virus’ spread, which in the previous state budget was expected to cost the state $5.6 billion assuming a six-week lockdown, has not been updated this year.
That’s despite lockdowns proving largely fruitless in preventing the virus’ virulence and spread in Victoria and New South Wales.
Still, the impact of COVID-19 features heavily throughout the papers’ fiscal and economic outlook, with outbreaks akin to the one affecting NSW at present listed as one of the most prominent risks to the state’s finances.
Outbreaks in other states are also listed as a risk, with consumer and business confidence and national supply chains likely to be the most severely impacted by the virus’ spread outside of WA.
Farther afield, the emergence of vaccine-resistant strains of the virus akin to the Delta variant is listed as having a possible impact on revenues.
That’s in addition to increased debt globally associated with increased stimulus spending, which is thought to have heightened sensitivity linked to sudden changes in interest rates.
Any further outbreaks in China are also listed as a danger to the state’s economic outlook, with that country’s attempts to staunch rising infections considered a present danger to WA’s export revenues.
Domestically, payroll tax could contract by up to $41 million and stamp duties by $21 million because of an outbreak, driving down expected state tax revenue of $10 billion.
Royalty income, which is expected to pump a further $10.1 billion into the state, could also take a hit, with budget papers noting negative the impact of a weaker Australian dollar and lower iron ore price as a significant risk to revenues.
Preparedness for a possible outbreak is accounted for in health spending, with $487 million earmarked for response and preparation measures such as hotel quarantine and vaccine rollout.
Addressing previous lockdown-induced hardships also features throughout, including through a $24.5 million electricity credit scheme for small businesses and $47.4 million to meet claims under the lockdown assistance grants program.
No numbers are given about operation of a purpose-built quarantine facility mooted for Bullsbrook, with operating costs for a federally funded facility to be reflected in the next state budget to be unveiled in May.
Despite tapering growth projections, Premier Mark McGowan made much of the state’s economic performance, noting GSP had been driven by a strong housing market and retail spending.
“Our policy to crush and kill the virus means Western Australians are living in one of the freest and most open societies in the world,” he said.
“My government’s strong COVID-19 response has given WA households and businesses the confidence to go about their normal lives.”
