“Unnecessarily inflationary” handouts in the cashed-up West Australian budget are likely to displease the Reserve Bank, according to a top economist.
And such was the largesse on offer in Thursday’s budget – headlined by a $2.4 billion surplus – it could also supercharge the GST wars.
WA Treasurer Rita Saffioti confirmed the state’s eighth consecutive surplus, with major spends underpinned by a royalties boom and GST take.
There is a four-year infrastructure pipeline of $44.3 billion, including a much-needed boost to support housing stock.
However, it was the cash handouts that caught the eye, including to motorists and families.
Every WA licence-holder will receive $100 – irrespective of whether they drive a gas-guzzler, an EV or a bike – while families will be handed $250 for every high school student, and $150 for each in primary school or kinder.
The cost-of-living relief was announced two days after high inflation caused the central bank to raise interest rates owing to high inflation.
On announcing the rise, RBA governor Michele Bullock urged governments, state and federal, to look for ways to constrain demand.
AMP chief economist Shane Oliver labelled the handouts “unnecessarily inflationary” and “a classic example of why we cannot rely on politicians to keep inflation in check”.
“They are in complete defiance of RBA governor Bullock’s comments on Tuesday,” he said.
“They just make it harder to get inflation back down and will put more pressure on the RBA and hence mortgage holders.”
The handouts also run counter to Premier Roger Cook’s pre-budget pledge to target cost-of-living relief, although there is plenty of that too.
A $1 billion package funds a new carers gold card, expanded free public transport, capped regional flight costs for locals, and energy rebates.
BankWest Curtin Economics Centre director Alan Duncan said it would be wrong to characterise the budget as un-strategic.
“It was a budget that was looking to try and address bottlenecks in the system, address shortages of housing, shortages of skills, address infrastructure struggling to keep pace with population growth,” he said.
“It was a really welcome scale of commitment to those issues.”
There’s no doubt Western Australia’s economy is powering the nation, the question is, how much of that largesse should it keep, and how much should it share with the less well-off.
The past eight years of combined surpluses – which tallies more than $23 billion – correlate to a 2018 policy by Scott Morrison’s government to increase its GST distribution.
That move has been labelled the “worst public policy decision of the 21st century” by economist Saul Eslake, but is cheered in WA.
Prof Duncan said he saw the debate as live, but without a compelling case for change.
“I would not take this budget as a signal that says WA is swimming in it,” he said.
“The use of the additional revenues have been very smart, exactly what you should be doing, not locked into recurrent spending, and looking to the longer term.”