Western Australia forecast an operating budget deficit of A$147 million ($134 million) in the year to June 30, 2015, as a China-led mining investment boom wanes and slowing growth curbs government revenues.
The projected deficit will follow a forecast surplus, which excludes infrastructure spending, of A$386 million in the 2013-14 fiscal year, state Treasurer Troy Buswell said in a statement today. Growth is forecast to slow to 2.5 percent in 2014-15 from an estimated 3.25 percent this fiscal year and 5.75 percent in 2012-13, according to the budget papers.
“As major resource projects transition from a construction phase to a production phase, the demand for labor has begun to ease, and so has growth in the state government’s tax revenue,” Buswell said in the statement. Net debt for the total public sector is forecast to rise to A$28.4 billion by June 30, 2017, from A$18.5 billion at June 30, 2013.
The challenges faced by Western Australia Premier Colin Barnett mirrors slowing growth and declining revenue nationally, which prompted federal Treasurer Chris Bowen to forecast last week the budget deficit will blow out to A$30.1 billion this fiscal year. Prime Minister Kevin Rudd and opposition leader Tony Abbott have put management of the nation’s $1.5 trillion economy at the center of their election campaigns ahead of a Sept. 7 ballot.
“There are indications activity has slowed a bit there, with the capital expenditure boom coming to an end,” Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, said before the state’s budget announcement today. “The state’s royalties still look okay because commodity prices are holding up and there should be big increases in volumes given all the new investment that has been put in place.”
Work is progressing on Chevron Corp.’s A$52 billion Gorgon liquefied natural gas project and BHP Billiton Ltd.’s expansions to iron ore operations. The state is home to mining magnates such as Gina Rinehart, Australia’s richest person, and Fortescue Metals Group Ltd. founder Andrew Forrest.
Australia’s largest state by area, with 2.6 million square kilometers (1 million square miles) of land, earned A$97 billion from minerals and energy sales in 2012, down from A$108 billion in 2011, according to government figures. The state produced A$51 billion of iron ore last year, a record A$24.4 billion of petroleum products -- including A$11 billion of LNG -- and A$9.4 billion of gold.
The state’s unemployment rate of 4.6 percent is lower than the national average of 5.7 percent.
“Following many years of above-average economic expansion, the economy in Western Australia is now slowing with business investment falling from its historical highs, as large resource projects are completed, and before a related pick-up in production and exports takes hold,” Moody’s Investors Service said in a statement following the budget.