The WA treasurer remains adamant raising taxes in the state budget was not an option, despite ratings agency Moody’s saying not enough has been done to prevent further financial pain.
Moody’s has not changed WA’s credit rating but warns widening budget deficits are credit negative, noting the state has curbed spending but not sufficiently to stop debt rising even further.
WA is currently the only Australian jurisdiction in deficit, with debt forecast to balloon to $40.2 billion in 2019-20.
The ratings agency noted payroll tax was estimated to rise by only 0.2 per cent as well-paid mining jobs were replaced by lower paid service positions, while land tax and royalties were forecast to fall by 5.6 per cent and eight per cent respectively, contributing to a 3.1 per cent drop in revenues.
After tightening belts in the public sector, lifting payroll and land taxes were among the few measures Treasurer Mike Nahan had to boost revenue, but he didn’t want to do that in the 2016-17 budget because of the impact it would have on sluggish property and labour markets.
He’s also aware of the housing industry’s sentiments, given land tax has sharply risen three times in the past three years.
Opposition treasury spokesman Ben Wyatt said the increases had a dramatic impact and were estimated to slash dwelling investment by 8.75 per cent in 2016-17.
Dr Nahan said a further hike was out of the question.
“Moody’s would argue that when you get an 18 per cent drop in your revenues, you make up the difference in a year in our tax base – that would destroy the economy,” he said.
Instead, the treasurer is relying on $16 billion worth of asset sales, with poles and wires utility Western Power the centrepiece of the plan.
Most of the funds are earmarked for retiring debt, while $5 billion will go into a new infrastructure fund that Mr Wyatt has described as a “dirty little trick.”
“Mr Nahan is seeking to claim the money from asset sales without a plan to actually make the sale,” he said.
Dr Nahan said he was confident he’d successfully spruik the proposal to the Liberal’s alliance partners the Nationals, despite their opposition to the privatisation of Fremantle Port.
Premier Colin Barnett, who previously questioned the wisdom of offloading Western Power but was convinced by Dr Nahan to put it on the chopping block, says the public will see the merits.
Mr Barnett denied it was a desperate measure in desperate times, and as it would not be advanced ahead of the state election in March, he’d consider re-election a mandate to proceed.
Originally published as Raising taxes not an option: WA treasurer