It’s time to call bullshit on when a Budget surplus is really a Budget surplus.
If your household has $200 a week left over after all your bills are paid then you are operating a household surplus. Well done you.
But what if you didn’t include your mortgage payments, or the cost of renovating the pool room?
That’s what successive governments in WA have been doing for a very long time – claiming they are running surpluses when in fact the “leftover” cash, and more, is swallowed up by spending on projects such as new railway lines, hospitals refurbishments and schools.
Mark McGowan’s third Budget has brought this accounting sleight of hand into sharp relief because of the incessant high-fiving between the Premier and the Treasurer over the earlier-than-expected return to surplus.
“McGowan Government delivers WA an operating budget surplus” thundered the top line of the first media statement issued by Ben Wyatt today.
It then drove home the triumph with two dot points.
“Operating surplus of $553 million in 2018-19 – first surplus in five years achieved after just two years in office.”
“$1.5 billion operating surplus in 2019-20, and continuing surpluses across entire forward estimates period.”
Note the persistent use of the word “operating”. “Operating” Budget takes into account the day-to-day running of the Government of Western Australia. The wages of the State’s nurses, police and teachers, as well as their bandages, bullets and chalk are all “operational” expenses.
What the “operating” Budget doesn’t account for is the cost of building and renovating the hospitals, cop stations and classrooms that those public servants work in. Nor does it consider the enormous costs of maintaining utilities such as Water Corp and Western Power.
To reveal the real state of the books you need to brush aside Mr Wyatt’s media statement and open Page 4 of Budget Paper 3 (warning: do not operating heavy machinery after reading because it may make you drowsy).
Here, in a table entitled Key Budget Aggregates, you get a very different story.
The last line of that table, under the important subhead “The Total Public Sector”, accounts for every buck that comes in and every buck that goes out of the WA Treasury.
That table reports a deficit of $1.4 billion in 2018-19 (not a surplus of $553 million, as Mr Wyatt’s press release noted in bullet point No. 1) and a deficit of $248 million in 2019-20 (not a $1.5 billion surplus as trumpeted in bullet point No. 2).
It is not until 2020-21 that the Budget records a real surplus. That is, once every cost is taken into account (including the utilities and capital works projects like Metronet) there is money left over — $954 million in the case of 2020-21.
It’s important to understand the difference between an operating surplus (which Mark McGowan, Colin Barnett, Alan Carpenter, Geoff Gallop, Richard Court et al loved to talk about) and a “Total Public Sector” surplus because it is only when revenue exceeds total costs that you can start to pay down your debt.
It’s why our total debt isn’t moving that much despite the miraculous recovery in our fortunes courtesy of more GST and bumper iron ore royalties.
At this stage you might be thinking the WA Treasury is stacked with Balinese money changers. It’s not. And Ben Wyatt isn’t fiddling the books any more than Mike Nahan did.
If anything, Mr Wyatt delivered a Budget that’s more transparent than its predecessors. As bizarre as it sounds, today’s Budget is the first to include the cost of leasing government offices and vehicles.
The honesty was forced upon the Government by a change in accounting standards which is so boring I almost fell asleep writing that line.
Can you imagine trying to run your household budget without taking into account the rent you pay or the finance on your car?
The WA Government has been, effectively hiding about $2.5 billion of debt each year.
The $34.6 billion in debt reported at the time of the last Budget was actually $36.6 billion.