- The budget is headlined by record investments in the health system and infrastructure
- An operating surplus of $5.7 billion is expected in 2021-22, decreasing to $1.6 billion in 2022-23
- Net debt is forecast to decline to $29.9 billion in 2021-22 but increase over the forward estimates
The 2022-23 Western Australia Budget handed down on 12 May 2022 by Premier and Treasurer Mark McGowan delivered the State’s fourth consecutive operating surplus since 2018-19.
Western Australia's domestic economy (measured by State Final Demand) is forecast to grow by 5.25% in 2021-22, the strongest growth in a decade, with an increase of 4% expected in 2022-23. This strong domestic activity underpins the State’s overall economic growth (measured by Gross State Product), which is estimated to grow by 3.75% in 2021-22 and 2% in 2022-23.
Strong economic growth driven by increased consumer spending, and business and government investment is expected to create 68,700 jobs in 2021-22 and a further 28,900 jobs in 2022-23. The unemployment rate is forecast to decrease to 3.75% in 2022-23, the lowest of all the States, and remain at this rate over the forward estimates.
The tight labour market and limited supply is expected to see wage growth increase from an estimated 2% in 2021-22 to 2.75% in 2022-23. However, strong domestic economic conditions, supply chain constraints and geopolitical factors are driving elevated inflation, with the Consumer Price Index (CPI) forecast to increase by 4% in 2021-22, easing to 2.75% in 2022-23.
A strong economy and elevated commodity prices will see an estimated operating surplus of $5.7 billion recorded in 2021-22, only slightly lower than last year’s $5.8 billion surplus. An operating surplus of $1.6 billion is also expected in 2022-23, with further surpluses projected over the forward estimates. The lower operating surplus forecast for 2022-23, relative to 2021-22, is primarily the result of substantially lower iron ore price being budgeted.
This improved fiscal capacity has enabled the Government to address a range of priorities in the budget, including cost of living support for all Western Australian households, record investments in the State’s health and mental health systems and infrastructure, supporting jobs and diversifying the economy, addressing climate change and paying down debt.
The budget forecasts that total public sector net debt will decline to $29.9 billion by 30 June 2022. However, net debt is expected to increase moderately over the forward estimates as a result of the Government’s record infrastructure investment and conservative iron ore forecasts, reaching $33.9 billion in 2025-26.
Key budget announcements
Outlined below are ten budget announcements to help members guide their clients and businesses.
1. Cost of living support
All Western Australian households will benefit from cost of living support including a $400 Household Electricity Credit from July 2022, and free Rapid Antigen Tests as part of a $635 million investment which is estimated to save households around $150. However, the average Emergency Services Levy charge will rise by 5% in 2022-23 to fund critical fire and emergency services, electricity and water charges will rise by 2.5%, Transperth and Transwa standard fares will increase by 2%, and motor vehicle related charges for vehicle licences, motor injury insurance, the recording fee and driver's licence will rise by 3.4% for the average household.
2. Health system
A record $2.5 billion will be invested in the State’s health and mental health systems. Funding highlights include a $252 million Emergency Department Reform Package to address system pressures, and a $47 million initial response to the Infants, Children and Adolescents Taskforce report, comprising additional front-line mental health staff in regional Western Australia, peer support workers, and virtual support for at-risk children.
3. COVID-19 response
An additional $1.6 billion has been committed to the Government’s continuing COVID-19 response, increasing the total funding to $11.2 billion. Major investments include $635 million to procure and distribute more Rapid Antigen Tests, $537 million to bolster WA health services including testing and vaccination clinics, hospital response and preparedness, $237 million for small business grants and industry assistance and relief, and $42 million for school COVID-19 support measures.
4. Economic diversification
The budget supports the Government’s priority to diversify the economy by investing $1.3 billion in a range of initiatives to drive long-term growth and create jobs. This includes support for regional development and export industries, through significant additional investment in economic infrastructure, such as ports and road projects. Highlights include $332 million to upgrade Geraldton Port to expand capacity to meet demand, $250 million for the Pinjarra Heavy Haulage Deviation project, and $120 million to upgrade the Moorine Rock to Mount Holland Road that will support the Covalent lithium mine.
An $80 million boost to the Investment Attraction Fund will see investment in industry-led diversification proposals to create local jobs in new and emerging industries. The budget also supports the recovery of export sectors such as tourism, events and international education as international borders reopen. This includes $69.5 million for the tourism sector to attract blockbuster and business events and develop tourism experiences in national parks. The Industrial Land Development Fund will also receive a $50 million funding increase.
A $1 billion investment to expand the METRONET program of works will fund new public transport system projects including the relocation of the Canning Bridge Bus Interchange, removal of the Morrison Road level crossing on the Midland line, and further investment in the Train Control and Signalling project to increase the capacity of the rail network and the Thornlie-Cockburn Link and Yanchep Rail Extension.
6. Climate and environment
A further $652 million has been allocated in the budget to address climate change and environmental issues. This is headlined by an additional $500 million investment in the Climate Action Fund, increasing the total investment to $1.25 billion. The budget also includes an additional $30 million to support the Native Forest Just Transition Plan, to help workers transition out of the native timber logging industry.
Notably, the budget provides funding to accelerate the use of zero and low emissions vehicles. This includes $59.3 million to create a Clean Energy Car Fund that will provide up to 10,000 rebates of $3,500 to Western Australians who purchase an electric or hydrogen fuel cell car up to the value of $70,000.
The Fund will also invest $22.6 million in electric vehicle charging infrastructure, including $10 million to support not-for-profits and small and medium-sized businesses with grants to cover up to half the cost of installing charging infrastructure.
To align with existing measures in Victoria, New South Wales, South Australia and Tasmania, the budget also introduces a distance-based road user charge for zero and low emission vehicles from 1 July 2027. The charge will operate at a rate of 2.5 cents per kilometre for battery electric and hydrogen vehicles and 2 cents per kilometre for plug-in hybrid vehicles. Both rates will be indexed to CPI from 1 July 2022.
The budget also includes a further $31 million for climate action research and planning to support carbon emissions reduction initiatives, $62 million to increase renewable energy generated at Rottnest Island to 75% and upgrade water assets, and further funding for environmental protection including $19.9 million for WA’s Plan for Our Parks which aims to create five million hectares of new national parks, marine parks and other conservation reserves.
7. Digital Capability Fund
The budget commits $400 million to top up the Digital Capability Fund. The Fund is designed to mitigate service delivery and cyber security risks and progress digital transformation. Key initiatives include a feasibility study on the barriers, benefits and risks of adopting eInvoicing in Western Australia, upgrading ICT systems across government including the State’s land-use planning system, and the first phase of the roll-out of electronic medical records for the public hospital system.
8. Remote Communities Fund
The budget will provide $350 million to establish a new Remote Communities Fund, with a matching contribution to be sought from the Commonwealth Government. The Fund will regularise and upgrade water and electricity services, and provide new and refurbished housing in remote First Nations communities. The Fund will allocate $50 million in 2022-23, with a further $100 million allocated each year for three years from 2023-24.
9. Skilled workforce training
The budget invests $76.5 million in targeted training initiatives to address the State’s current skills needs and build a skilled workforce for the future. Highlights include $38.4 million to continue the Lower fees, local skills initiative through TAFE to help increase training enrolments, apprenticeships and traineeships, $14.3 million to support the development of the building and construction workforce, $11 million to build the WA defence industry's professional and para-professional workforce, and $2.4 million to attract international students to regional areas to help address skills shortages. The Jobs and Skills WA website provides further information including resources for businesses and employers.
10. Tax reforms, incentives and simplification
A range of tax reforms and incentives announced in the budget will promote infill development and boost housing supply in metropolitan and regional areas, including support for build-to-rent projects and off-the-plan multi-storey dwellings, density bonuses for private developments that include social housing, and enhancements to the home ownership products offered by the Government’s lending provider Keystart.
The budget also introduces a tax simplification package to reduce the tax burden on some taxpayers and simplify tax administration, as detailed below.
Tax Simplification Package
The budget includes the following tax simplification measures, several of which are contained in the Duties Amendment Bill 2022 which was passed by the Legislative Assembly on 12 May 2022:
Transfer duty reduced
From 1 July 2022, the general rate of transfer duty will be reduced to be equivalent to the rate of duty for residential transactions. From the same date, the residential or business property concession will be modified to ensure the transfer duty concession provides benefits on all eligible transactions up to $200,000.
Duty on prospecting licenses removed
From 1 July 2022, the duty on prospecting licenses and derivative mining rights in relation to prospecting licences will be removed, unless they are transferred with other dutiable property.
Other duty measures
From the day after the Duties Amendment Act 2022 receives Royal Assent, there will be an exemption from motor vehicle duty for service demonstrator vehicles and faulty vehicles that are returned to the seller. From the same date, duty on Family Court Orders will no longer apply. Duty will only apply when property is actually transferred under an Order.
Quarterly payroll tax return threshold increased
From 1 July 2022, the quarterly payroll tax return lodgement threshold will increase from $100,000 to $150,000. This means payroll taxpayers with an annual liability of up to $150,000 will have the option of paying quarterly (rather than monthly), providing cashflow benefits and reducing administrative processes. Payroll taxpayers with an annual liability of less than $20,000 will continue to have the option to pay annually.
Surcharge for paying land tax in three instalments removed
From 1 July 2022, the 2% surcharge on assessed land tax liability when paid over three instalments will be removed. This will benefit up to 12,000 taxpayers annually by providing greater choice of payment schedules and assisting cashflow.
Land tax relief for build-to-rent developments
A 50% land tax concession for new, eligible build-to-rent developments will commence on 1 July 2023. This measure will provide an incentive to developers to boost the supply of properties available to rent. Similar concessions have been introduced or announced in New South Wales, South Australia and Victoria.
Off-the-plan transfer duty rebate scheme amended
From 1 June 2022, the existing off-the-plan transfer duty rebate will be amended to increase assistance for buying lower value dwellings. Eligible purchasers will receive a transfer duty rebate equal to 100% of the duty payable for a dwelling valued at less than $500,000, and between 100% to 50% of the duty payable for a dwelling valued between $500,000 and $600,000. The existing rebate of 50% will continue to apply for dwellings valued above $600,000. The eligibility period for this rebate ends on 24 October 2023 and the maximum value of the rebate will remain capped at $50,000.