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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
2013-02-05 Daily Xml
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BUDGET FORECAST

Mr MARSHALL (Norwood—Leader of the Opposition) (14:38): My question is to the Premier. What will the Treasurer do to improve the accuracy of Labor's budget forecasts, given that only three and a half years ago Labor forecast a $304 million surplus this year which is now forecast to be a $1.17 billion deficit, that is, a $1.5 billion turnaround?

The Hon. J.W. WEATHERILL (Cheltenham—Premier, Treasurer, Minister for State Development, Minister for the Public Sector, Minister for the Arts) (14:38): I thank the honourable member for his question. One of the reasons why the Australian states within our financial system are regarded as such a good credit risk is because they adopt a method of accounting for future expenditure which publishes the whole of their forward estimates over four years. That is not usual, and other jurisdictions do not necessarily adopt that best practice, and it has been adopted here for years.

I remember when they talked about doing it in the United Kingdom, and it was meant to be some great innovation to show the general spending review of the next three years. We have been consistently doing that for an extended period in the Australian financial system. What that means is that we necessarily publish over four years across the forward estimates. That allows a transparency which is comforting to ratings agencies and comforting to the investing community, but it also means we have to forecast over an extended period and, by definition, if you are forecasting over an extended period, things change, like global financial crises or the responses to a global financial crisis.

What we are seeing here is a massive de-leveraging in household expenditure. Where people essentially had savings ratios which were almost zero, they are now up to something in the order of 10 per cent. So, we are seeing a massive change in consumer spending behaviour, where basically people are saving because they are worried about the uncertain financial position.

Ms Chapman: You.

The Hon. J.W. WEATHERILL: No; they are not worried about me. What they are worried about is when they look at their superannuation accounts, when they look at their valuation notices, they do not see this endless increase in net wealth which was driving this consumption spending. So, there has been a very significant change in the connection between spending patterns and the way in which people's incomes exist. There is still 95 per cent of people in work, historically high labour force participation rates, so there should be confidence but there is not. So, that is what is causing this, not some nonsense.

Members interjecting:

The Hon. J.W. WEATHERILL: This is rational behaviour in relation to an uncertain world situation. It is not made any the better by irrational scaremongering by those opposite.

Members interjecting:

The SPEAKER: I call the member for Davenport to order.

The Hon. J.W. WEATHERILL: That is what they have to offer. The truth is that we make adjustments to our forecast. Nobody was complaining over the years when they were underestimating revenue growth. We make conservative estimates. We always attempt to make conservative estimates based on the best available advice and when circumstances change we make the relevant adjustments to our budget. When circumstances change we also respond by making additional savings initiatives. We have carved out very substantial additional savings initiatives. We have accepted some of the responsibility ourselves by reducing the number of ministers from 15 to 13. We continue to look for prudent management of the state's finances.

The SPEAKER: The member for Fisher.

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