19 May 2011

Economic Assumptions

2010-11 2011-12 2012-13 2013-14 2014-15

Real Gross State Product growth (%) 4.0 4.5 4.0 4.0 4.0

Employment growth (%) 3.0 2.5 2.5 2.25 2.0

Unemployment rate (percentage points) 4.5 4.5 4.25 4.25 4.0

Consumer Price Index growth (%) 2.75 3.0 3.25 3.25 3.25

Exchange rate $US/$A (cents) 98.0 97.5 90.6 83.7 76.9

Iron ore prices ($US/t) (FOB) 138.8 149.1 128.8 108.2 87.5

Population growth (%) 2.3 2.2 2.2 2.1 2.1

Economic GrowthGross State Product, Western Australia

-1

0

1

2

3

4

5

6

7

8

1990-91 1994-95 1998-99 2002-03 2006-07 2010-11 2014-15

Western Australia Australia

Per cent

ForecastWestern Australianlong-run average

Financial OutlookForecasts

(a) Commonwealth Budget papers (b) Total non-financial public sector (c) As defined by Standard & Poor’s

2010-11 2011-12 2012-13 2013-14 2014-15

Estimated Budget Forward Forward Forward

Actual Estimate Estimate Estimate Estimate

GENERAL GOVERNMENT SECTOR

Net operating balance ($m) 784 442 768 787 471

- 75% scenario 784 442 768 2,578 3,124

- 65% scenario (a) 784 442 1,174 1,938 2,479

TOTAL PUBLIC SECTOR

Net debt at 30 June ($m) 13,387 17,291 19,959 21,451 22,441

- 75% scenario 13,387 17,291 19,959 19,660 17,997

- 65% scenario (a) 13,387 17,291 19,554 19,894 18,876

Asset Investment Program ($m) 6,936 7,638 7,303 6,129 5,401

Cash position ($m) -3,763 -3,944 -2,534 -1,425 -852

- 75% scenario -3,763 -3,944 -2,534 299 1,663

- 65% scenario (a) -3,763 -3,944 -2,263 -341 1,018

KEY FINANCIAL RATIOS (b)

Net interest cost to revenue (%) 2.1 2.4 2.8 2.9 3.0

Net financial liabilities (c) to revenue (%) 60.6 67.3 70.8 71.1 69.6

2011-12 RevenueTaxation$6,965m

28%

GST revenue grants

$3,617m14%

Other Commonwealth

grants$6,145m

24%

Other$748m

3%

Public corporations $1,149m

5%

Sales of goods and services$1,815m

7%

Royalty income $4,794m

19%

TOTAL$25,233m

Financial OutlookNational Pool and GST Grants

0

20,000

40,000

60,000

80,000

2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14

0

2,000

4,000

6,000

8,000

National Pool (LHS) WA grants (RHS)

$ million

Forecast

$ million

WA Average GST relativity = 0.98WA Average GST

relativity = 0.59

Financial OutlookGST Grants

4,6425,037

5,3815,717

6,040

3,165 3,233

2,497

1,997

3,617

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010-11 2011-12 2012-13 2013-14 2014-15

Equal per capita GST grants

Estimated GST grants

$ million

LOSS = $12.3 Billion

Royalties Redistribution

0

2,000

4,000

6,000

8,000

Western Australia Victoria Western Australia Victoria

Royalties earned (pre-GST) Royalties received (post-GST)

$ Million

Financial Outlook Total Duty on Transfers, Western Australia

0

500

1,000

1,500

2,000

2,500

2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15

$ million

Forecast

Financial ResponsibilityOperating Position and Cash Position

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15

General government operating balance

Total public sector cash position

$ million

Forecast

Financial ResponsibilityNet Debt(a) and Net Financial Liabilities(b)

(a) Total public sector (b) Total non-financial public sector

0

5

10

15

20

25

30

2001 2003 2005 2007 2009 2011 2013 2015

0

20

40

60

80

100

120Net debt at 30 June (LHS)Net debt at 30 June - 75% scenario (LHS)Net debt at 30 June - 65% scenario (LHS)NFL as a share of revenue (RHS)

NFL as a share of revenue - 75% scenario (RHS)NFL as a share of revenue - 65% scenario (RHS)

$ billion

Forecast

Per cent

Financial ResponsibilityNet Interest Cost as a Share of Revenue(a)

33% GST Scenario

(a) Total non-financial public sector

0

1

2

3

4

5

6

7

8

9

1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12 2014-15

Per cent

ForecastBelow triple-Acredit rating

Above triple-Acredit rating

4.5% upper limit

Asset Investment Program

0

1

2

3

4

5

6

7

8

9

10

2001-02 2004-05 2007-08 2010-11 2013-14

General government

Public corporations

$ billion

Liberal-NationalTotal = $40.2b

Average = $6.7b p.a.

LaborTotal = $28b

Average = $3.5b p.a.

Forecast

Asset Investment Program2011-12

Ports$134m

2%

Water Corporation$861m11%

PTA$346m

5%

Housing Authority$654m

9%Finance$309m

4%

Electricity utilities$1,337m

18%

Corrective Services$154m

2%Main Roads

$646m8%

Education$850m11%

LandCorp$369m

5%

Other agencies$420m

5%

Health$1,558m

20%

TOTAL$7,638m

Increased AccountabilityDisciplined Financial Management

• 4.6% increase in charges for a representative household– Electricity tariffs (5%)

• Current subsidy costs $1.1 billion• Freezing tariffs would increase the subsidy to $3 billion

– Water charges (8.5%)– No change in:

• driver’s license fees• compulsory third party insurance premiums• motor vehicle recording fees• Transperth 50 cent student fees or• stamp duty on insurance premiums

Increased AccountabilityDisciplined Financial Management

• $3.5 billion package of new measures– Phased alignment of the iron ore ‘fines’ royalty rate

(currently 5.625%) to the 7.5% iron ore ‘lump’ rate ($1.9 billion)

– 5% efficiency dividend on GTEs ($515 million)– Targeted review of low priority programs ($300 million)– Deferred infrastructure spending ($541 million)

• These measures build on previous efficiency dividend savings ($1.46 billion over four years out of a target of $1.6 billion)

• Additional savings from procurement and State Fleet ($280 million over four years)

Increased AccountabilityDisciplined Financial Management

• Expenses up $1.8 billion (or 7.9%) in 2011-12

• Expense growth moderating – down from average of 10.9% over previous three years

• Government has restricted growth in number of full-time equivalent public servants to 1.7% in 2011-12

• Funding a further 400 voluntary separations – bringing total number of separations to over 1,200, for savings of $57 million per year

19 May 2011