Rita Saffioti gears up for post-election WA Budget in new era of uncertainty

Donald Trump has changed Rita Saffioti’s early morning habits. Where the WA Treasurer would once have opened her phone to look at the Italian soccer results, she now looks to see what Donald Trump is up to, and what effect his decisions are having on WA’s trading partners. As she prepares to bring down her second State Budget, on June 19, Ms Saffioti says the uncertainty of the world keeps her awake at night, as she tries to forecast for the future. “One of the things (that’s happening) is daily fluctuations in global policy,” the former Department of Finance and Treasury Department economist this week told The Sunday Times in an interview. “I used to wake up and see what the soccer scores were. “Now my first thing is to look at the White House Facebook page and see what has happened overnight.” Ms Saffioti said the upheaval globally was making it harder to predict commodity prices and exchange rates — both crucial to the State Budget. “You can’t predict what’s happening tomorrow – let alone four years time,” she observed. As WA’s biggest trading partner, Ms Saffioti’s Budget heavily relies on royalties that come from iron ore sales to China. WA Treasury figures show that in 2023-2024, iron ore royalties totalled $10 billion — 81 per cent of total royalties. She admits that if demand for steel weakened in China, the potential effect on WA could be devastating – royalties for lithium, gold, nickel, alumina, copper and mineral sands nowhere near the billions coming from iron ore. “It (less demand for WA iron ore from China) would have a significant impact on our ability to deliver strong budgets,” Ms Saffioti acknowledged, adding the uncertainty highlighted the need for WA to diversify its economy. State governments of both persuasions have for years talked about the need to diversify the economy but despite this, WA’s economic fortunes continue to be beholden to the mining industry — mainly iron ore sales to China. For the next four years, the Government plans to grow the tourism market through direct flights, making more products in WA and more infrastructure and more events — which she highlighted was receiving hundreds of millions in investment. “We’re looking at the Perth Convention Centre, which is in the last stages of planning (for redevelopment),” she said. “That means more conventions here and more business events which would see a significant boost to the economy.” She said supporting economic growth would be a big driver over the next four years. “We have the green steel projects down in Kwinana, the urea project in Karratha which is a $6 billion project,” she said. “(It’s about) where we can add value to our commodities. “With the Made in WA Plan, it’s how we can invest to make more things here. “Because we have got a big source of renewable energy, many countries are really looking to WA. “We have got the commodities; we have the energy source — we are making sure we have the land ready and the right environment to get more things done in WA.” EY senior economist Paula Gadsby said the WA economy generally was travelling well, and — like all economists — noted the potential flow-on effect from global uncertainty, including potentially business and consumer confidence. “The main thing we have been concerned about at EY has been around the uncertainty and market volatility we have seen, which is dragging down confidence in Australia and most likely WA as well,” Perth-based Ms Gadsby said. But she said there were also opportunities for WA to grow markets that might not traditionally have been on the trading list. “There are positives here too,” she said. “If there is additional stimulus from the Chinese Government to support the Chinese economy, like investing in infrastructure which requires iron ore and commodities, that could be great for WA. “And also, there could be emerging trade opportunities for exports as well . . . it could enhance our attractiveness as a place to invest.” Chamber of Commerce and Industry WA chief economist Aaron Morey urged the State Government to focus on ensuring the State’s supply chain infrastructure was resilient, that trade markets were diverse and the State had energy and resource security. “We are living in challenging times,” he said. “There has to be a focus on making sure we are responsive to that increased volatility that we are seeing across the world at the moment.” Defence, biomedical products and research and the space sector were key areas WA could diversify in, Mr Morey said. Ms Saffioti’s second Budget will almost certainly forecast another multi-billion-dollar surplus for 2025-26. Treasury’s pre-election financial statement in February forecast a $3.2 billion surplus for this financial year and another $10b in surpluses over the next three years. Billions in iron ore royalties and billions in GST receipts and payroll and land taxes should ensure this Budget and others following it continue to be inked in black — to the envy of the rest of the country. The current iron ore price is hovering at around $US100 per tonne. But at last year’s May budget, the government based its economic assumptions at $US71 a tonne. That was adjusted to $US98 per tonne in February. Describing this forthcoming budget as “solid, reliable, with no surprises” Ms Saffioti said delivering Labor’s election promises was the No.1 priority. Those commitments add up to $3.4b — and include a $217m motorsport circuit and amphitheatre at Burswood, a $107m plan to run more ferries on the Swan, a $104m upgrade to the Royal Perth Hospital emergency department and a $387m solar battery rebate plan amongst those. The Burswood sports and entertainment precinct project has drawn backlash from residents. Just this week Greens leader Brad Pettitt moved a motion in parliament calling for the racetrack to be scrapped saying and the project should be reviewed by a Parliamentary committee. Anyone who thinks Ms Saffioti will walk away from the contentious Burswood project should think again. “I think people don’t properly understand what we’re doing,” she said. “We’re building an amphitheatre, we’re building dedicated cycling facilities and we are going to work on the existing road layout and build some more roads to create what would be a racetrack for Supercars. “The other thing is, it’s an old rubbish tip. Let’s call it: It’s a rubbish tip. That area was always designed to be a sports and entertainment precinct.” With an election done and another four years of government secured, Premier Roger Cook now wants a NRL side in Perth. Just what that will cost WA taxpayers is still unknown. Ms Saffioti said spending in health would also be massive this Budget. There is the building of a new women’s and babies’ hospital, and new or redeveloped emergency departments at Royal Perth, Midland and Sir Charles Gairdner hospitals. Housing will also be a big-ticket item, much of it in partnership with the Federal Government. Struggling West Australians hoping for significant cost-of-living relief are likely to be disappointed this Budget. The Treasurer hosed down expectations of another power bill rebate to ease cost-of-living pressures on West Australians. “We’re not going to be speculating about what’s in the Budget, but I’ll say this — our focus is on our election commitments,” she said. Financial Wellbeing Collective general manager Helena Jakupovic has a different view. “The cost of living affects everyone, but for clients solely reliant on income support, the impact of increased costs for food, housing, utilities, and essentials is amplified,” Ms Jakupovic said. “While cost of living is a common topic right now, what we see is community members going without basic needs. “The upcoming State budget must address this.” But while billions in operating surpluses are set to continue, State debt , currently forecast at $33.8 billion for this year, is tipped to hit $37.6 billion in three years time. Labor’s massive infrastructure spend since coming to office, including $13b on Metronet, does not come cheap. Ms Saffioti is unapologetic for Labor’s spending, saying infrastructure was needed for a population that is growing 2.5 per cent annually. Asked whether she was comfortable that State debt was now approaching $40b, Ms Saffioti replied: “Yes, I am.” “We have delivered a record infrastructure spend, where we withstood a COVID, pandemic crisis — and we still have the best books in the nation,” she said. Ms Saffioti pointed to WA’s net debt to gross State product ratio of 7.6 per cent compared to other States “anywhere between 10 and 25 per cent” — and a local rate well below 13.8 per cent, the highest in the nation, when Labor was elected in 2017. Treasury’s February figures also showed government expenses also on the increase, growing from $41b in 2023-24 to a forecast $43b in 2027-28. Asked whether government spending needed to be reined in, she said: “We want to make sure we keep expenditure sustainable. “But in particular on health, the demands on the health system are massive. “We have got population growth and we have an ageing population. “So, if you look at our biggest area of growth it’s the health spend when you talk of magnitude of spending – of dollars.” “I know where it (money) has gone. “It’s gone to core services.” Mr Morey said the WA Government had to be careful that expense growth did not get out of hand in coming years. “You have to make sure that in areas the government can control that expenditure, in particular that public sector wages spend, that there is reasonable restraint and that we don’t allow that to get out of control,” he said.

Rita Saffioti gears up for post-election WA Budget in new era of uncertainty

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