Infrastructure and Fiscal FederalismCEDA Infrastructure Series

Wednesday 21 September 2005

Timothy MarneyUnder Treasurer

OverviewEconomic and fiscal outlookPublic sector capital investmentPublic Private Partnerships (PPP) PolicyDealing with the CommonwealthPoor deal for WADisincentives for developmentRegulatory issues

Characteristics of the State EconomyMining sector 18.0% of State economy vs 4.5% nationallyPopulation Growth 1.6% vs 1.2% nationallyEconomic Growth higher than national average 4.4% vs 3.9% over last ten yearsPer capita GDP 15% above national averageContributes 30% of Australias merchandise exports

Economic Outlook for WAFigures sourced from the 2005-06 Budget Papers, Economic and Fiscal Outlook(a) Outcomes

Economic Growth Rates by Jurisdiction

Chart2

222.75

3.72.753

5.14.254.25

4.32.52.5

7.55.254.5

33.23.25

0.47.36.2

1.521.8

3.823

2003-04 Actual

2004-05 Estimate

2005-06 Estimate

Economic Growth (%)

Sheet1

2003-04 Actual2004-05 Estimate2005-06 Estimate

NSW222.75

VIC3.72.753

QLD5.14.254.25

SA4.32.52.5

WA7.55.254.5

TAS33.23.25

NT0.47.36.2

ACT1.521.8

AUS3.823

Sheet1

000

000

000

000

000

000

000

000

000

2003-04 Actual

2004-05 Estimate

2005-06 Estimate

Economic Growth (%)

Sheet2

Sheet3

Business InvestmentCurrent and Prospective Investment ProjectsJune 2005

Sheet1

State or Territory$m

Australian Capital Territory4

Tasmania7.5

Northern Territory13.5

South Australia20.8

Victoria49.1

Queensland68.5

New South Wales78.9

Western Australia103.5

Chart1

4

7.5

13.5

20.8

49.1

68.5

78.9

103.5

$billion

Sheet2

Sheet3

Net Operating Balance

General Government

Operating Revenue GrowthGeneral Government

WA Capital Works Program

Chart3

2.882286

3.1087

2.9839

2.8895

3.2847

4.136

4.746

Year

Actual Expenditure ($m)

Sheet1

WA CAPITAL WORKS PROGRAM

$billion

1999-002.88

2000-013.11

2001-022.98

2002-032.89

2003-043.28

2004-05 Preliminary Outcome4.14Preliminary outcome for 2004-05. Final actual outcome will be published in the 2005-06 MYR.

2005-06 Budget Estimate4.752005-06 Budget Estimate

Sheet1

Year

Actual Expenditure ($m)

Sheet2

Sheet3

2005-06 Capital Works Program

Chart1

1001545

714800

599376

529549

301717

228232

226879

220423

130350

798244

State Housing Commission/ Housing and Works21%

Other16%

Sheet1

Approved Project Cashflow By Agency Report (WOG)State Housing Commission/ Housing and Works85936410601421001545

Financial Year 2004/05Water Corporation435010411696714800State Housing Commission/ Housing and Works85936410601421001545

AgencyAmount ($000's)Western Power315900464384599376Water Corporation435010411696714800

ActualEOTBudgetPublic Transport Authority of Western Australia269999568971529549Western Power315900464384599376

2003/042004/052005/06Commissioner of Main Roads324934367822301717Public Transport Authority of Western Australia269999568971529549

The State Housing Commission781,8121,053,487992,400State Housing Commission/ Housing and Works859,3641,060,1421,001,545Law and Order83424133808228232Commissioner of Main Roads324934367822301717

Albany Port Authority2117505,3501Water Corporation435,010411,696714,800Water Corporation435,010411,696714,800Education and Training165943196728226879Law and Order83424133808228232

Armadale Redevelopment Authority3658,8857,2501Western Power315,900464,384599,376Western Power315,900464,384599,376Health118026198010220423Education and Training165943196728226879

Broome Port Authority58512,3005,3201Public Transport Authority of Western Australia269,999568,971529,549Public Transport Authority of Western Australia269,999568,971529,549Western Australian Land Authority142019233905130350Health118026198010220423

Bunbury Port Authority5,11412,7006,3251Commissioner of Main Roads324,934367,822301,717Commissioner of Main Roads324,934367,822301,717State Supply Fleet118279111838119692Western Australian Land Authority142019233905130350

Bunbury Water Board3,0913,0381,8491Education and Training165,943196,728226,879Law and Order83,424133,808228,232Western Australian Planning Commission1074868222362105Other570097879300798244

Busselton Water Board9231,7131,1461Health118,026198,010220,423Education and Training165,943196,728226,879Premier and Cabinet86852975957289

Country Housing Authority8,01612,58412,4941Western Australian Land Authority142,019233,905130,350Health118,026198,010220,423East Perth Redevelopment Authority164014129857143

East Perth Redevelopment Authority16,40141,29857,1431State Supply Fleet118,279111,838119,692Western Australian Land Authority142,019233,905130,350Sport and Recreation5494728940481

Esperance Port Authority1,4827,20036,8001Justice48,27666,605119,448State Supply Fleet118,279111,838119,692Fremantle Port Authority96756627939958

Forest Products Commission8,70615,1216,1111Police Service35,14867,203108,784Western Australian Planning Commission107,48682,22362,105Esperance Port Authority1482720036800

Fremantle Port Authority9,67566,27939,9581Western Australian Planning Commission107,48682,22362,105Premier and Cabinet8,68529,75957,289Fire and Emergency Services Authority of Western Australia110972846928578

Geraldton Port Authority52,4649,9352,6341Premier and Cabinet8,68529,75957,289East Perth Redevelopment Authority16,40141,29857,143Culture and the Arts221783073823292

Gold Corporation1,2884,0902,0451East Perth Redevelopment Authority16,40141,29857,143Sport and Recreation5,4947,28940,481Conservation and Land Management157892714122623

Government Employees' Housing Authority9,54116,84313,8061Sport and Recreation5,4947,28940,481Fremantle Port Authority9,67566,27939,958Great Southern Development Commission264703419118

Insurance Commission of Western Australia9192,9263,2351Fremantle Port Authority9,67566,27939,958Esperance Port Authority1,4827,20036,800Industry and Resources123592671715800

Lotteries Commission1,9544,9053,2231Esperance Port Authority1,4827,20036,800Fire and Emergency Services Authority of Western Australia11,09728,46928,578Midland Redevelopment Authority86621843915456

Metropolitan Cemeteries Board6,3188,9282,9891Fire and Emergency Services Authority of Western Australia11,09728,46928,578Culture and the Arts22,17830,73823,292Independent Market Operator0015000

Midland Redevelopment Authority8,66218,43915,4561Culture and the Arts22,17830,73823,292Conservation and Land Management15,78927,14122,623Planning and Infrastructure115612557414700

Perth Market Authority4204,8005,5001Conservation and Land Management15,78927,14122,623Great Southern Development Commission2647,03419,118Community Development81961646414510

Port Hedland Port Authority4,03815,0084,5091Great Southern Development Commission2647,03419,118Industry and Resources12,35926,71715,800Racing and Wagering Western Australia26201011813888

Public Transport Authority of Western Australia269,999568,971529,5491Industry and Resources12,35926,71715,800Midland Redevelopment Authority8,66218,43915,456Government Employees' Housing Authority95411684313806

Racing and Wagering Western Australia2,62010,11813,8881Midland Redevelopment Authority8,66218,43915,456Independent Market Operator0015,000Land Information84321156813281

Rottnest Island Authority1,56817,5709,2301Independent Market Operator0015,000Planning and Infrastructure11,56125,57414,700Country Housing Authority80161258412494

Subiaco Redevelopment Authority3,13717,47510,9811Planning and Infrastructure11,56125,57414,700Community Development8,19616,46414,510Corruption and Crime Commission91903411955

The Eastern Goldfields Transport Board6009006001Community Development8,19616,46414,510Racing and Wagering Western Australia2,62010,11813,888Subiaco Redevelopment Authority31371747510981

The State Housing Commission781,8121,053,487992,4001Racing and Wagering Western Australia2,62010,11813,888Government Employees' Housing Authority9,54116,84313,806Rottnest Island Authority1568175709230

Water Corporation435,010411,696714,8001Government Employees' Housing Authority9,54116,84313,806Land Information8,43211,56813,281Agriculture722084078454

Western Australian Land Authority142,019233,905130,3501Land Information8,43211,56813,281Country Housing Authority8,01612,58412,494Country High School Hostels Authority595113098341

Western Australian Treasury Corporation7707135181Country Housing Authority8,01612,58412,494Corruption and Crime Commission919,03411,955Disability Services Commission336552747280

Western Power315,900464,384599,3761Corruption and Crime Commission919,03411,955Subiaco Redevelopment Authority3,13717,47510,981Armadale Redevelopment Authority36588857250

Dampier Port Authority21,72254,1496001Subiaco Redevelopment Authority3,13717,47510,981Rottnest Island Authority1,56817,5709,230Water and Rivers Commission231558787056

2,115,3303,101,1103,235,435Rottnest Island Authority1,56817,5709,230Agriculture7,2208,4078,454Bunbury Port Authority5114127006325

Curriculum Council2602,2531,776Housing and Works77,5526,6559,145Country High School Hostels Authority5,9511,3098,341Forest Products Commission8706151216111

Agriculture7,2208,4078,454Agriculture7,2208,4078,454Disability Services Commission3,3655,2747,280Perth Market Authority42048005500

Anti-Corruption Commission000Country High School Hostels Authority5,9511,3098,341Armadale Redevelopment Authority3658,8857,250Albany Port Authority2117505350

Botanic Gardens and Parks Authority11,1537,2983,102Disability Services Commission3,3655,2747,280Water and Rivers Commission2,3155,8787,056Broome Port Authority585123005320

Commissioner for Equal Opportunity7113295Armadale Redevelopment Authority3658,8857,250Bunbury Port Authority5,11412,7006,325Port Hedland Port Authority4038150084509

Commissioner of Main Roads324,934367,822301,717Water and Rivers Commission2,3155,8787,056Forest Products Commission8,70615,1216,111Zoological Parks Authority103736224076

Community Development8,19616,46414,510Bunbury Port Authority5,11412,7006,325Perth Market Authority4204,8005,500Insurance Commission of Western Australia91929263235

Conservation and Land Management15,78927,14122,623Forest Products Commission8,70615,1216,111Albany Port Authority2117505,350Lotteries Commission195449053223

Consumer and Employment Protection2,0745,1622,380Perth Market Authority4204,8005,500Broome Port Authority58512,3005,320Botanic Gardens and Parks Authority1115372983102

Corruption and Crime Commission919,03411,955Albany Port Authority2117505,350Port Hedland Port Authority4,03815,0084,509Metropolitan Cemeteries Board631889282989

Country High School Hostels Authority5,9511,3098,341Broome Port Authority58512,3005,320Zoological Parks Authority1,0373,6224,076Western Australian Meat Industry Authority15331852949

Culture and the Arts22,17830,73823,292Port Hedland Port Authority4,03815,0084,509Insurance Commission of Western Australia9192,9263,235Mid West Development Commission41215902661

Disability Services Commission3,3655,2747,280Zoological Parks Authority1,0373,6224,076Lotteries Commission1,9544,9053,223South West Development Commission125447802650

Economic Regulation Authority4917266Insurance Commission of Western Australia9192,9263,235Botanic Gardens and Parks Authority11,1537,2983,102Geraldton Port Authority5246499352634

Education and Training165,943196,728226,879Lotteries Commission1,9544,9053,223Metropolitan Cemeteries Board6,3188,9282,989Treasury and Finance714432322541

Education Services54346560Botanic Gardens and Parks Authority11,1537,2983,102Western Australian Meat Industry Authority1533,1852,949Consumer and Employment Protection207451622380

Environment2,0121,3141,684Metropolitan Cemeteries Board6,3188,9282,989Mid West Development Commission4121,5902,661Fisheries6592203642351

Fire and Emergency Services Authority of Western Australia11,09728,46928,578Western Australian Meat Industry Authority1533,1852,949South West Development Commission1,2544,7802,650Gold Corporation128840902045

Fisheries6,59220,3642,351Mid West Development Commission4121,5902,661Geraldton Port Authority52,4649,9352,634Bunbury Water Board309130381849

Gascoyne Development Commission4953,4701,040South West Development Commission1,2544,7802,650Treasury and Finance7,1443,2322,541Curriculum Council26022531776

Goldfields-Esperance Development Commission08538Geraldton Port Authority52,4649,9352,634Consumer and Employment Protection2,0745,1622,380Environment201213141684

Governor's Establishment2,6530100Treasury and Finance7,1443,2322,541Fisheries6,59220,3642,351Western Australian Greyhound Racing Authority92024751525

Great Southern Development Commission2647,03419,118Consumer and Employment Protection2,0745,1622,380Gold Corporation1,2884,0902,045Local Government and Regional Development59713871374

Health118,026198,010220,423Fisheries6,59220,3642,351Bunbury Water Board3,0913,0381,849Busselton Water Board92317131146

Heritage Council of Western Australia732,9001,050Gold Corporation1,2884,0902,045Curriculum Council2602,2531,776Parliamentary Services368216701144

Housing and Works77,5526,6559,145Bunbury Water Board3,0913,0381,849Environment2,0121,3141,684Indigenous Affairs2908601110

Independent Market Operator0015,000Curriculum Council2602,2531,776Western Australian Greyhound Racing Authority9202,4751,525Heritage Council of Western Australia7329001050

Indigenous Affairs2908601,110Environment2,0121,3141,684Local Government and Regional Development5971,3871,374Gascoyne Development Commission49534701040

Industry and Resources12,35926,71715,800Western Australian Greyhound Racing Authority9202,4751,525Busselton Water Board9231,7131,146Western Australian Sports Centre Trust21171840900

Justice48,27666,605119,448Local Government and Regional Development5971,3871,374Parliamentary Services3,6821,6701,144The National Trust of Australia (Western Australia)1700400895

Kimberley Development Commission6520107Busselton Water Board9231,7131,146Indigenous Affairs2908601,110Western Australian Tourism Commission8351924664

Land Information8,43211,56813,281Parliamentary Services3,6821,6701,144Heritage Council of Western Australia732,9001,050The Eastern Goldfields Transport Board600900600

Law Reform Commission of Western Australia111710Indigenous Affairs2908601,110Gascoyne Development Commission4953,4701,040Dampier Port Authority2172254149600

Local Government and Regional Development5971,3871,374Heritage Council of Western Australia732,9001,050Western Australian Sports Centre Trust2,1171,840900Western Australian Electoral Commission216284565

Mid West Development Commission4121,5902,661Gascoyne Development Commission4953,4701,040The National Trust of Australia (Western Australia)1,700400895Peel Development Commission5391087540

Office of Energy253292251Western Australian Sports Centre Trust2,1171,840900Western Australian Tourism Commission8351,924664Western Australian Treasury Corporation770713518

Office of the Auditor General264744446The National Trust of Australia (Western Australia)1,700400895The Eastern Goldfields Transport Board600900600Office of the Auditor General264744446

Office of the Director of Public Prosecutions345200200Western Australian Tourism Commission8351,924664Dampier Port Authority21,72254,149600Racing, Gaming and Liquor289210388

Office of the Information Commissioner343030The Eastern Goldfields Transport Board600900600Western Australian Electoral Commission216284565Small Business Development Corporation109679300

Office of the Public Sector Standards Commissioner513198198Dampier Port Authority21,72254,149600Peel Development Commission5391,087540Office of Energy253292251

Parliamentary Commissioner for Administrative Investigations53445772Western Australian Electoral Commission216284565Western Australian Treasury Corporation770713518Office of the Director of Public Prosecutions345200200

Parliamentary Inspector of the Corruption and Crime Commission149110Peel Development Commission5391,087540Office of the Auditor General264744446Office of the Public Sector Standards Commissioner513198198

Parliamentary Services3,6821,6701,144Western Australian Treasury Corporation770713518Racing, Gaming and Liquor289210388Registrar, Western Australian Industrial Relations Commission581395150

Peel Development Commission5391,087540Office of the Auditor General264744446Small Business Development Corporation109679300Kimberley Development Commission6520107

Pilbara Development Commission49310Racing, Gaming and Liquor289210388Office of Energy253292251Swan River Trust128110100

Planning and Infrastructure11,56125,57414,700Small Business Development Corporation109679300Office of the Director of Public Prosecutions345200200Governor's Establishment26530100

Police Service35,14867,203108,784Office of Energy253292251Office of the Public Sector Standards Commissioner513198198Commissioner for Equal Opportunity7113295

Premier and Cabinet8,68529,75957,289Office of the Director of Public Prosecutions345200200Registrar, Western Australian Industrial Relations Commission581395150Wheatbelt Development Commission7253573

Racing, Gaming and Liquor289210388Office of the Public Sector Standards Commissioner513198198Kimberley Development Commission6520107Parliamentary Commissioner for Administrative Investigations53445772

Recreation Camps and Reserve Board47600Registrar, Western Australian Industrial Relations Commission581395150Governor's Establishment2,6530100Economic Regulation Authority4917266

Registrar, Western Australian Industrial Relations Commission581395150Kimberley Development Commission6520107Swan River Trust128110100Education Services54346560

Salaries and Allowances Tribunal2106Governor's Establishment2,6530100Commissioner for Equal Opportunity7113295State Supply Commission03752

Small Business Development Corporation109679300Swan River Trust128110100Wheatbelt Development Commission7253573Goldfields-Esperance Development Commission08538

South West Development Commission1,2544,7802,650Commissioner for Equal Opportunity7113295Parliamentary Commissioner for Administrative Investigations53445772Office of the Information Commissioner343030

Sport and Recreation5,4947,28940,481Wheatbelt Development Commission7253573Economic Regulation Authority4917266Parliamentary Inspector of the Corruption and Crime Commission149110

State Supply Commission03752Parliamentary Commissioner for Administrative Investigations53445772Education Services54346560Law Reform Commission of Western Australia111710

State Supply Fleet118,279111,838119,692Economic Regulation Authority4917266State Supply Commission03752Salaries and Allowances Tribunal2106

Swan River Trust128110100Education Services54346560Goldfields-Esperance Development Commission08538Recreation Camps and Reserve Board47600

The National Trust of Australia (Western Australia)1,700400895State Supply Commission03752Office of the Information Commissioner343030Pilbara Development Commission49310

Treasury and Finance7,1443,2322,541Goldfields-Esperance Development Commission08538Law Reform Commission of Western Australia111710Anti-Corruption Commission000

Water and Rivers Commission2,3155,8787,056Office of the Information Commissioner343030Parliamentary Inspector of the Corruption and Crime Commission149110

Western Australian Electoral Commission216284565Law Reform Commission of Western Australia111710Salaries and Allowances Tribunal2106

Western Australian Greyhound Racing Authority9202,4751,525Parliamentary Inspector of the Corruption and Crime Commission149110Anti-Corruption Commission000

Western Australian Meat Industry Authority1533,1852,949Salaries and Allowances Tribunal2106Pilbara Development Commission49310

Western Australian Planning Commission107,48682,22362,105Anti-Corruption Commission000Recreation Camps and Reserve Board47600

Western Australian Sports Centre Trust2,1171,840900Pilbara Development Commission49310

Western Australian Tourism Commission8351,924664Recreation Camps and Reserve Board47600

Wheatbelt Development Commission7253573

Zoological Parks Authority1,0373,6224,076

1,169,3861,413,6561,515,680

Sum GG + Public Corporations3,284,7164,514,7664,751,115

Total Capital Works Program328471645147664751115

Agency$'000

The State Housing Commission992,400

Water Corporation714,800

Western Power599,376

Public Transport Authority of Western Australia529,549

Commissioner of Main Roads301,717

Education and Training226,879

Health220,423

Western Australian Land Authority130,350

State Supply Fleet119,692

Justice119,448

Police Service108,784

Western Australian Planning Commission62,105

Sheet2

Sheet3

Capital Spend by JurisdictionData sourced from Australian Bureau of Statistics (catalogue 5512.0)

Sheet1

COMPARISON BETWEEN JURISDICTIONS

CapitalCapitalCapitalPopulationReal economic

expenditureexpenditurespendingannual averageannual average

per capitaper capitaannual averagegrowth sincegrowth since

1998-992003-04growth since1998-991998-99

1998-99

$$%%%

Western Australia1,0051,2706.21.43.8

New South Wales7099547.21.02.8

Victoria6266973.41.23.3

Queensland1,5401,095-4.72.14.8

South Australia4825563.40.53.0

Tasmania6781,26713.70.41.4

Sheet2

Sheet3

MBD05826542.wmf

What Capacity Do We Have to Fund InfrastructureFinancial Targets:Net Debt to RevenueOperating SurplusesPriorities arise during and outside the normal budget process.Around $2 billion in proposals in the pipeline and will need to be considered in the near future.

Partnerships for GrowthPublic Private Partnerships (PPP) PolicyPolicy launch in December 2002Document available on the Department of Treasury and Finance website at : www.dtf.wa.gov.auThe policy position is broadly consistent with other jurisdictionsThis topic was covered at the last CEDA lunch forum

The Funding TaskThe infrastructure development funding task is relatively larger in Western Australia than nationallyAs the demand on State funds increases for large infrastructure projects, the Government will continue to explore PPPs as a procurement delivery optionCommonwealth funding is also important

Dealing with the CommonwealthProblems with structure of FederationPoor deal for WA on infrastructureWrong type of C'wth project assistanceOther disincentives for development the Grants CommissionRegulation Issues

Fundamental Elements of Efficient FederalismSubsidiarity authority exercised at the lowest level that produces efficient resultsGovernments accountable to their electorsCo-operation on national interestsClear roles for each level of governmentFinancial independenceCentral government assistance that preserves State government motivations to perform

WAs Contribution to the National EconomyWANTVICNSWQLDSATAS$2.6b$39.3b$9.6b$27.9b$20.8b$38.8bGoods and Services Exports 2003-04$2.3b

WAs Contribution to the Federal BudgetWA$2,916mNT-$2,274mSA-$2,045mQLD-$3,067mNSW$4,831mVIC$2,572mTAS-$2,934mNet Fiscal Subsidy 2003-04

Poor Deal for WATotal Spending on Infrastructure2003-04 (per capita)

Chart6

1600

320

420

$ per capita

Sheet1

$ (per capita)

WA1600

Cwth on WA320

Cwth on Rest of Australia420

$m407

NSW136.5

VIC100.7

QLD78.2

WA40.0

SA31.2

TAS9.8

ACT6.6

NT4.1

Sheet1

0

0

0

$ per capita

Sheet2

Sheet3

Poor Deal for WAThe Federal Government contribution to infrastructure funding is poor, particularly in regard to export related infrastructure where significant benefits from exports accrue to the Commonwealth. Engineers Australia, 2005, Western Australian Infrastructure Report CardThe State Government is looking for a more mature partnership with the Federal Government in this regard and is pursuing a more cooperative approach.

10% of population30% of exports25% of National Hwys8% of AUSLINK fundingAUSLINK

Poor quality in regional areas

WA having to contribute to Cwth responsibility

NWI mainly relevant to Eastern States water rights issuesWA dam inflow fallen from 338 GL to 120GL

CGC Does not recognise our spending on Burrup

Who Benefits From Projects?TAS$11.88mNT$4.87mWA-$60.81mNSW$165.72mACT$7.90mVIC$122.64mQLD$97.25mSA$37.47mCwth586.43mNet Benefits of Burrup Project2003-04

Who Benefits From Projects?Net Benefits of Gorgon Project2003-04

Chart13

11

0.3

$11b

$300m

$b

Sheet1

$b

Commonwealth11

WA0.3

$m407

NSW136.5

VIC100.7

QLD78.2

WA40.0

SA31.2

TAS9.8

ACT6.6

NT4.1

Sheet1

136.5485

100.6511

78.2254

40.0488

31.1762

9.768

6.5934

4.07

$m

Sheet2

0

0

$11b

$300m

$b

Sheet3

Wrong Type of AssistanceSyntroleumGTL ResourcesMethanex

Right Type of Assistance

Disincentives for DevelopmentCGC aims to equalise States fiscal capacity, having regard to:expenditure requirements; andrevenue raising capacityCommonwealth Grants Commission

Access RegulationCentralisedLight handed DecentralisedHeavy handed

Address in NCP review

Way ForwardNeed for Commonwealth to better understand WA needsNeed for Commonwealth to better understand its interest in supporting WAPublic debate to put pressure on CommonwealthDialogue with Commonwealth

ConclusionMassive development in WAWA major contributor to nationWA government doing all it can to provide necessary infrastructureCommonwealth must provide greater supportFederal structures such as CGC must be reformed