As McGowan announces $607m stimulus, analysts say WA can weather virus storm
Mar 16, 2020
Premier Mark McGowan has announced a freeze on increases to household fees and charges, and the fast-tracking of payroll tax relief to help cushion the WA economy from the impact of the global coronavirus pandemic.
The stimulus package, which the government argues is worth $607 million, comes on top of a range of other measures designed to kickstart the state economy in 2019 before the onset of the coronavirus crisis, including $290 million for school and hospital maintenance.
The state government had already announced it was looking to freeze power and water charges in the upcoming state budget, but Mr McGowan said on Monday afternoon this would be extended to car registration payments, public transport fares, and the emergency services levy.
These payments would be frozen until the middle of 2021.
WA public servants would also be entitled to new COVID-19 sick leave, which would provide them with up to 20 sick days if their paid personal, carers, or sick leave entitlements become exhausted.
"There is no doubt our economy will feel the effects of the coronavirus," Mr. McGowan said.
"These measures will provide relief to WA families, seniors, and small businesses to further support our economy to withstand the headwinds we face.
"For the first time in 16 years, household fees and charges will be frozen, providing relief and certainty to each and every Western Australian."
The Premier said the energy assistance payment for low-income earners would be doubled to $600, the next round of payroll tax cuts would be brought forward by six months, and businesses impacted by coronavirus could defer payroll tax payments.
Mr. McGowan said further measures were being considered.
Treasurer Ben Wyatt said the state package complemented the federal government's package.
He said the average household which accessed the energy assistance payment would have their payment "front-ended", which meant their first bill was likely to be in credit.
There would also be $114 million paid to support small businesses that paid the payroll tax, which would receive a one-off grant of $17,500.
Opposition Leader Liza Harvey said she would back the stimulus package, but said many Western Australians would miss out on help.
She said it fell short of what was required to support businesses and protect jobs.
"We need to make sure that this health crisis doesn’t turn into jobs and economic crisis," Ms. Harvey said.
She said there were many in the community – such as self-employed workers like tradesmen, casual workers, the working poor and those in the gig economy – who would struggle with the economic impacts of coronavirus and who would not be eligible for the doubling of the Energy Assistance Package.
"The government is not helping small businesses with a turnover of less than $1 million such as cafes, restaurants, small retailers and sole traders," Ms Harvey said.
"We also would have like to have seen hardship payments (HUGS) made available so that every West Australian who is struggling can access payments.
"I am concerned that the payroll tax benefits will not flow for months, many businesses could go to the wall by then. The government should be doing more now, not in July.."
WA Health Minister Roger Cook provides an update on COVID-19 crisis.
Ms Harvey said the state government needed to act with more urgency to help all West Australians who would be impacted by coronavirus, especially in regional and remote WA.
WA has 'fiscal firepower' to weather the coronavirus storm
WA is better placed than most Australian states to fight the coronavirus-driven downturn, according to two separate reports released Monday detailing the state of our economy.
Deloitte's quarterly WA Economic Outlook report and Moody's 2020 mid-year budget update comparison suggest WA’s projected budget surpluses held the state in good stead in its effort to combat the volatile economy.
The Deloitte report said COVID-19 had faltered WA’s economic recovery and highlighted the state's exposure to China.
"This crisis shines a light on the need for Western Australia to diversify our export base, over time," the report said.
"In 2019, WA exported $79 billion worth of iron ore to China, accounting for 82 percent of exports to that country. A further $12.5 billion of our exports to China came from LNG, gold, copper, nickel and other raw materials, while WA pastoralists and graziers exported a combined $1.6 billion in agricultural products."
But the news might not be all bad if China implements a stimulus package similar to the US$500 billion one it launched during the GFC.
"If the magnitude of the coronavirus stimulus package is anything like that, Australian exporters could expect stronger demand for steelmaking inputs including iron ore," Deloitte Access Economics partner Noel Richards said.
The key to keeping WA ticking, however, lay mostly with household spending, which was trending up, but now Mr. Richards suggested the COVID pandemic would smash that optimism.
"These trends make the timing of the virus outbreak unfortunate for WA, as sentiment seemed to be on the up late last year. Coronavirus now risks household consumption weakening, with the speed and scale of the global outbreak likely to weigh on consumer confidence," he said.
"These are uncertain times, but remaining calm, measured and acting on the advice of authorities is the best medicine to containing the spread of the virus, and ultimately limiting the economic fallout."
WA's investment pipeline was looking rosy, with $157 billion worth of work flagged, but $123 billion of this, including the Scarborough and Browse gas field developments, has no firm commitment. Mr. Richards predicted these projects would likely be delayed in the short term.
Mr Richards was confident WA’s $10 billion worth of forecast surpluses would give the state the "fiscal firepower" needed for a state-level stimulus program be required in addition to the $17.6 billion stimulus package announced by the Commonwealth last week.
The Moody’s report suggested there were growing disparities between the resource-rich WA and other states, where economic growth was driven primarily by debt-funded public spending.
"Fiscal discipline since the 2017 election, strong commodity prices, and GST reforms have strengthened WA's budget position with forecast reductions in its debt burden, setting it apart economically from the other Australian states," Moody's vice-president and senior credit officer John Manning said.
While WA still enjoyed its hard-fought GST win, Moody's suggested reduced household spending as a result of the virus would shave three per cent off the state’s GST allowance this year, from an estimated $3.581 billion to $3.489 billion.
The rating agency also reiterated Deloitte’s concerns about WA's reliance on China and mining."State revenues remain vulnerable to a sustained deterioration in Chinese activity, reflecting the weight of mining royalties on its budget, due to the spread of the coronavirus, trade tensions, as well as geopolitical or other factors," the report said.
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