1. Department of Treasury and Finance Government of Western Australia Infrastructure and Fiscal Federalism CEDA Infrastructure Series Wednesday 21 September 2005 Timothy Marney Under Treasurer

2. Department of Treasury and Finance Government of Western Australia Overview Economic and fiscal outlook Public sector capital investment Public Private Partnerships (PPP) Policy Dealing with the Commonwealth –Poor deal for WA –Disincentives for development –Regulatory issues

3. Department of Treasury and Finance Government of Western Australia Characteristics of the State Economy Mining sector – 18.0% of State economy vs 4.5% nationally Population Growth – 1.6% vs 1.2% nationally Economic Growth – higher than national average 4.4% vs 3.9% over last ten years Per capita GDP 15% above national average Contributes 30% of Australia’s merchandise exports

4. Department of Treasury and Finance Government of Western Australia Economic Outlook for WA 2002-032003-042004-052005-06 Actual Estimated Actual Budget Estimate Economic Growth (%)4.87.55.254.5 Employment Growth (%)2.51.74.2 (a) 2.0 Unemployment Rate (%)6.05.74.7 (a) 4.75 Wages Growth (%)3.73.24.3 (a) 3.75 CPI Growth (%)2.72.13.2 (a) 2.5 Figures sourced from the 2005-06 Budget Papers, ‘Economic and Fiscal Outlook’ (a) Outcomes

5. Department of Treasury and Finance Government of Western Australia Economic Growth Rates by Jurisdiction

6. Department of Treasury and Finance Government of Western Australia Business Investment Current and Prospective Investment Projects June 2005

7. Department of Treasury and Finance Government of Western Australia Net Operating Balance General Government

8. Department of Treasury and Finance Government of Western Australia Operating Revenue Growth General Government

9. Department of Treasury and Finance Government of Western Australia WA Capital Works Program

10. Department of Treasury and Finance Government of Western Australia 2005-06 Capital Works Program

11. Department of Treasury and Finance Government of Western Australia

12. Department of Treasury and Finance Government of Western Australia

13. Department of Treasury and Finance Government of Western Australia Capital Spend by Jurisdiction Data sourced from Australian Bureau of Statistics (catalogue 5512.0)

14. Department of Treasury and Finance Government of Western Australia What Capacity Do We Have to Fund Infrastructure Financial Targets:  Net Debt to Revenue  Operating Surpluses Priorities arise during and outside the normal budget process. Around $2 billion in proposals in the pipeline and will need to be considered in the near future.

15. Department of Treasury and Finance Government of Western Australia Partnerships for Growth Public Private Partnerships (PPP) Policy Policy launch in December 2002 Document available on the Department of Treasury and Finance website at : www.dtf.wa.gov.auwww.dtf.wa.gov.au The policy position is broadly consistent with other jurisdictions This topic was covered at the last CEDA lunch forum

16. Department of Treasury and Finance Government of Western Australia The Funding Task The infrastructure development funding task is relatively larger in Western Australia than nationally As the demand on State funds increases for large infrastructure projects, the Government will continue to explore PPPs as a procurement delivery option Commonwealth funding is also important

17. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Dealing with the Commonwealth Problems with structure of Federation Poor deal for WA on infrastructure Wrong type of C'wth project assistance Other disincentives for development – the Grants Commission Regulation Issues

18. Department of Treasury and Finance Government of Western Australia Fundamental Elements of Efficient Federalism Subsidiarity – authority exercised at the lowest level that produces efficient results Governments accountable to their electors Co-operation on national interests Clear roles for each level of government Financial independence Central government assistance that preserves State government motivations to perform

19. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia WA’s Contribution to the National Economy WA NT VIC NSW QLD SA TAS $2.6b $39.3b $9.6b $27.9b $20.8b $38.8b Goods and Services Exports 2003-04 $2.3b

20. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia WA’s Contribution to the Federal Budget WA $2,916m NT -$2,274m SA -$2,045m QLD -$3,067m NSW $4,831m VIC $2,572m TAS -$2,934m Net Fiscal Subsidy 2003-04

21. Department of Treasury and Finance Government of Western Australia Poor Deal for WA Total Spending on Infrastructure 2003-04 (per capita) Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia

22. Department of Treasury and Finance Government of Western Australia Poor Deal for WA The Federal Government contribution to infrastructure funding is poor, particularly in regard to export related infrastructure where significant benefits from exports accrue to the Commonwealth. Engineers Australia, 2005, Western Australian Infrastructure Report Card The State Government is looking for a more mature partnership with the Federal Government in this regard and is pursuing a more cooperative approach.

23. Department of Treasury and Finance Government of Western Australia AUSLINK 10% of population 30% of exports 25% of National Hwys 8% of AUSLINK funding

24. Department of Treasury and Finance Government of Western Australia Poor quality in regional areas

25. Department of Treasury and Finance Government of Western Australia WA having to contribute to C’wth responsibility

26. Department of Treasury and Finance Government of Western Australia NWI mainly relevant to Eastern States water rights issues WA dam inflow fallen from 338 GL to 120GL

27. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia North West Shelf Royalties (2003-04 - $563 million)

28. Department of Treasury and Finance Government of Western Australia CGC Does not recognise our spending on Burrup

29. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Who Benefits From Projects? TAS $11.88m NT $4.87m WA -$60.81m NSW $165.72m ACT $7.90m VIC $122.64m QLD $97.25m SA $37.47m Cwth 586.43m Net Benefits of Burrup Project 2003-04

30. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Who Benefits From Projects? Net Benefits of Gorgon Project 2003-04

31. Department of Treasury and Finance Government of Western Australia Wrong Type of Assistance Syntroleum GTL Resources Methanex

32. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Common User Water Supply Access Roads Company A Company B Company C Company D Company E Right Type of Assistance

33. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Disincentives for Development CGC aims to equalise States’ fiscal capacity, having regard to: –expenditure requirements; and –revenue raising capacity Commonwealth Grants Commission

34. Department of Treasury and Finance Government of Western Australia Access Regulation Centralised Light handed Decentralised Heavy handed Address in NCP review

35. Department of Treasury and Finance Government of Western Australia Department of Treasury and Finance Government of Western Australia Way Forward Need for Commonwealth to better understand WA needs Need for Commonwealth to better understand its interest in supporting WA Public debate to put pressure on Commonwealth Dialogue with Commonwealth

36. Department of Treasury and Finance Government of Western Australia Conclusion Massive development in WA WA major contributor to nation WA government doing all it can to provide necessary infrastructure Commonwealth must provide greater support Federal structures such as CGC must be reformed