Budget Gets the Tick

Mr Court faced two challenges in this year's budget which go to the core of his credibility as a economic manager.

First he had to produce a credible measure of the bottom-line.  Second he had to put the budget back on a sustainable footing.

He accomplishes both in the 2000-2001 State Budget.

Over the last 12 months we received four different and divergent measures of the bottom-line.  Applied to this year's accounts these produce results ranging from a healthy surplus to a massive deficit.  Understandably people have become more than a bit confused and sceptical.

The Budget properly solves this by adopting an accounting system developed by the Australian Bureau of Statistics.

What the 2000-2001 Budget shows -- and one suspects why the this accounting system was not used in previous years -- is that the budget has been in deficit in each of the last four years.

What this means is that the government has been borrowing to meet operating or running costs for each of the last four years.  In short, it has been relying on the proverbial Bankcard.

Its only been able to run these deficits without losing its triple-A credit rating because of gains from privatisation.  However, if they continue the deficit spending much longer, a down grading is on the cards.

The Court Government has in place -- indeed is continuing with -- a massive capital works program.  However, capital spending has not been the problem.  The budget is an operating budget and it does not include capital spending.  The deficits have arisen simply because the running cost have exceed taxes, grants and other income.

The challenge was to get the budget back into sustainable balance.

And he is on track to achieve this albeit just.  The budget is expected to finish the current year (1999-2000) in deficit by around $60 million which is about $160 million better than at the start of the year and better than the $135 million deficit record the previous year.

Importantly the budget is forecast to go into surplus next year by $42 million and remain in surplus in each of the four subsequent years.  This is not a large figure and has yet to be achieved, but is clearly in the right direction.

How has this turn-around been achieved?

First and foremost operating spending has been brought under control.  Departments have been kept to budget with few overruns -- they should after years of excessive spending.  Recurrent spending will increased -- by 3.8 per cent in 2000-2001 -- but is concentrated in priority areas including health, education, public safety and welfare.

Second, the economy is on the mend and as a result revenue is growing again.  The economy has recovered from a "growth recession" and is now growing at 4 per cent and is conservatively forecast in the Budget to improve slightly over the next few years.  Mineral royalties are up and payroll tax receipts are expected to improve with faster in employment and wage growth.

Importantly business investment which went into decline during the last few years of the 1990s, is on the rise and is expected to once again drive the WA economy.

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