Housing, red tape focus as state budget lifts
WA Business News
The state budget will be in surplus in 2019/20, according to Premier Mark McGowan, while a $421 million expansion of the Keystart program for first homebuyers and a move to reduce red tape will be two new policies to support the local economy.
Speaking at the Committee for Economic Development of Australia’s state of the state lunch today, Mr McGowan said the budget surplus would be a year ahead of schedule, in the 2020 financial year.
It compares to a deficit for that year projected in the May budget of $160 million, down from prior forecasts of up to $1.1 billion, he said.
The improvement comes after increases in revenue, estimated to be rising at 3.2 per cent annually in the May budget, and continued low spending growth, about 2 per cent per annum after adjustments.
For the 2019 financial year, spending growth was to be 0.9 per cent.
One big win for the state government was when changes to the GST distribution system were legislated, which will be worth about $1.7 billion across the next three years.
The government has said that cash will be used to pay down debt.
Shadow Treasurer Dean Nalder said he had been surprised the government had not announced a return to surplus for the 2019 financial year, given the GST deal and improving revenue from iron ore royalties.
He said the government did deserve credit for expense management, although the jury was still out on the impact of changes to the public sector through the machinery of government reforms.
Mr McGowan said the move to grow the Keystart loan book would support the building and construction sector amid ongoing concerns about house prices.
It will increase the loan book to about $4.8 billion.
That would be enough for around 1,100 new home loans.
“At the moment, (house) prices around the nation are in decline,” Mr McGowan said.
“While all states have their own factors, it’s evident the Australian Prudential Regulation Authority’s credit control measure of the past three to four years, and the further tightening from the Banking Royal Commission, has dampened activity all across the nation.
“(Keystart) is the most financially responsible mechanism the state government has at its disposal to assist the housing market, and support the residential construction industry.”
He added that the expansion of the Keystart portfolio would not impact net debt.
It will, however, affect gross debt and consequently any credit rating covenants that rely on that metric.
Mr Nalder said the government was inconsistent in its approach on housing.
“We do have some parts of the economy that have been really struggling… one of them has been the housing sector,” he said.
“We’ve been calling on the government to do something, they’ve announced something today but we still feel its a lack of a policy change.
“One in six houses now in WA owe more on their mortgage than what the house is worth, we’re really concerned.”
Mr Nalder said the Treasurer had been talking about an oversupply of housing but was not doing enough to stimulate demand.
“What they’re doing around the foreign investor surcharge, at this time when it’s a soft market, we think will have an impact on housing,” he said.
“What they’ve done around the regional migration status… is having a massive impact, negative impact on international students and that flows through to the housing sector.”
Urban Development Institute of Australia WA chief executive Tanya Steinbeck welcomed the Keystart move.
“We formally put our requests for the expansion of Keystart to the government on several occasions in the past couple of years, including in our state budget submission and in person to the minister for housing,” Ms Steinbeck said.
“More than one third of all first home buyers in WA access finance through Keystart, making it an essential tool for getting more people into home ownership who otherwise may struggle to access finance through other institutions such as private lenders.
“Despite the current property market downturn in WA, first home buyers have continued to be active in the market with recent figures highlighting that first home buyers made up 25 per cent of the total finance commitments for housing in WA in 2017-18.
“This is well above the national proportion of 14 per cent and represents the significant role that this market segment can play in the property market recovery in WA.”
Mr McGowan also announced today a program to improve regulation and encourage investment, an initiative called Streamline WA.
The body will be a simple place for industry and the community to refer regulatory issues, and will be advised by other organisations such as the Economic Regulation Authority.
Public sector agencies will need to report their reform activities, too.
“Two of our key election commitments were to create more local jobs for Western Australians and to ensure the public service and government were delivering real outcomes for our community,” he said.
“Streamline WA will help deliver on both commitments, freeing the Western Australian economy more to reach its full potential.
“Our service priority review found there were significant economic, environmental and social opportunities available through better regulation and regulatory practices.
“It’s not about removing regulation altogether – but rather about liberating business and industry from barriers, costs and complexity of ineffective regulation and bureaucracy, and bringing us into the modern era.
“Streamline WA will complement the service priority review and the machinery of government changes, making it easier for businesses to invest in WA, diversify the economy and create more jobs for Western Australians.”