May 2016 - The Western Australian economy is facing difficult times - a consequence of its dependency on commodity price cycles. Its domestic output is forecast to contract for a fourth consecutive year in 2016-17. However, because net exports still grow strongly, the State's overall economic growth is forecast to remain positive - at 1.25% in 2016-17 and then increasing to 3% in 2019-20.
The problem for the Western Australian Government is that subdued commodity prices and declining business investment impact on its revenue base, while the State's share in GST revenue is yet to be adjusted from its current low base (around 30% relative to the State's population share).
As a result, the budget will be again in the red in 2016-17, with a deficit forecast at $3.9 billion, after a $2 billion deficit in 2015-16.
But the budget outlook is more positive from then onwards, as the domestic economy is expected to recover, and the State's share in GST revenue will increase.
The general government operating balance is forcast to return to surplus by 2019-20. By then, the State's net debt is forecast to peak at around $40 billion.
Given the financial constraints, the budget shows commendable committment to mental health, delivering $865.8 million to the Mental Health Commission - representing a 84% increase to the sector since 2008-2009.
Diversifying the State's economy should be an important issue for the Government. However, notwithstanding some notable initiatives targeting innovation across sectors, the general focus of spending remains on areas in which the State already has comparative strength: mining, petroleum, tourism, agriculture and fisheries.
Major initiatives include:
Science and Innovation
$20 million over four years are allocated for an Innovation Package, under which Government departments will work with relevant industries to support Western Australian researchers, innovators and start-up businesses.
The funding is in addition to the around $30 million spent each year on innovation in areas such as defence industries, shipbuilding and science. The innovation package includes an innovation summit on 28 July 2016, which will focus on the development of a five-year Innovation Strategy for the State. The Government also plans the development of a web-portal, which is to act as a one-stop shop to connect innovators, incubators, mentors and investors. The package will also include a new Start IT Up Challenge initiative, offering prizes worth $100,000 to innovators using Government data for technology development.
$6.7 million over five years will be spent in 2019-20 for the Western Australian Biodiversity Science Institute Forestry.
$1 million funding for the Neurotrauma Research Program, which includes the Spinal Emergency Evaluation of Deficits (SPEED) and Immediate Cooling and Emergency Decompression (ICED) projects. The research is expected to lead to a clinical trial establishing the benefits of spinal cooling in 2017.
Environment
The Government will invest
$22 million over four years for the Kimberley's marine and national parks. This includes the creation of the Great Kimberley Marine Park, the Kimberley National Park and a new national park at Horizontal Falls.
To date, the Government has invested $103 million in the Kimberley Science Strategy.
Agriculture and fisheries
An extra $50 million provided by the Royalties for the Regions program is allocated for a suit of measures under the Seizing the Opportunity Agriculture initiative, which is to enable the agrifood industry to capitalise on rising global demand for food.
$20 million will fund an WA Open for Business project to help the agriculture and food sectors to increase trade and investment activities in the regional sector.
$2.3 million over four years will go towards a large-scale and industry-run multi-species shellfish hatchery in Albany, while a further $1.3 million provided in 2016-17 will fund additional Aquaculture Development Zones.
Mining and Petroleum
The Exploration Incentive Scheme will be extended with $10 million each year from 2017-18 to 2019-20.
The Minerals Research Institute of Western Australia will be funded with $6 million to 2018-19. Established in 2014, the Institute has so far committed $7.1 million to minerals research projects.