Economic and Fiscal Outlook 

The 2022-23 State Budget confirmed that WA’s financial position remains sound, despite the ongoing challenges from the COVID-19 pandemic, and emerging issues around supply and labour constraints.

The State is on track for a $5.7 billion operating surplus in 2021-22, following a $5.8 billion surplus in 2020-21. This is significantly higher than the $2.4 billion projected in the Mid-year Review due to a number of factors:

  • Royalty revenues are up $2.8 billion, on the back of higher than expected iron ore prices (US$139.5 per tonne) as demand from China for iron ore surged;  

  • Tax receipts are up $533 million, as transfer duty, motor vehicle taxes and payroll tax revenues have come in higher than expected as a result of the strong domestic economy; and

  • An increase in health funding from the Commonwealth primarily related to COVID-19 initiatives.

The Budget is expected to remain in the black across the forward estimates with a $1.6 billion surplus expected in 2022-23, before rising to a healthy $3 billion by 2025-26.

The strong Budget position has allowed the Government to continue paying down debt. Total public sector net debt is expected to fall below $30 billion at the end of 2021-22, and will remain below $34 billion across the forward estimates.

Despite the ongoing impact of the pandemic, and labour and supply chain constraints, the WA economy has remained strong with economic growth expected to be 3.75% in 2021-22 - the highest rate of growth since 2013-14.

Our strong economic performance was underpinned by the domestic economy (as measured by State Final Demand) which expanded by 5.25% in 2021-22, on the back of high levels of spending by household and businesses, as well as Government stimulus spending.

Household consumption grew by an estimated 5% in 2021-22, as the closure of the State’s borders redirected spending into purchases such as vehicles, furniture and other retail. Now that the borders are open, household consumption is expected to slow to 2.5% by 2025-26, as pent-up demand for interstate and international travel is released and domestic spending returns to more normal levels.

Business investment grew by 4.75% in 2021-22, supported by high levels of business confidence and investment in mining projects. These major projects are expected to continue in 2022-23 driving a further 8.25% increase in business investment, before stabilising at a high level.

Dwelling investment grew by 15.6% in 2021-22, due to the impact of Commonwealth and State Government COVID-19 stimulus grants for residential construction. Dwelling investment activity is expected to remain elevated with a further 12.75% increase in 2021-22, before dropping to 0.5% in 2022-23 and decreasing in the following year as the impact of the stimulus programs is unwound.

Net exports are expected to act as a drag on growth over the next two years, as the opening of the borders see Western Australians spend their tourist dollars outside the State.

As a result of its record infrastructure program, Government investment is predicted to grow by 12.5% in 2021-22, 16.5% in 2022-23 and 7.5% in 2023-24. The Government’s $33.9 billion Asset Investment Program will focus on transport, health, education, utilities, and community infrastructure over four years.

The strong conditions in the WA economy, compounded by Commonwealth and State stimulus spending and the closure of the state’s borders, has means that capacity constraints are being experienced in relation to labour and materials.
This has led to a tight labour market and cost and time blowouts on major projects.

Employment is expected to grow by 5% in 2021-22, before easing to 2% in 2022-23 and 1.25% thereafter. This has meant the unemployment rate has dropped to 3.75% in 2022-23 and is expected to remain at this low level across the forward estimates.

The continued strong demand for labour will start to have a modest upwards impact on wages with the Wage Price Index (WPI) expected to rise 2.75% in 2022-23 and 3% in the outyears.

Employees will experience a decline in wages in real terms in 2021-22 as the Perth Consumer Price Index (CPI) is estimated to increase 4% primarily due to the impact of supply chain disruptions and higher oil prices. As these pressures begin to ease, growth in the CPI is projected to slow to 2.75% in 2022-23 and then remain at 2.5% through the forward estimates.

Looking ahead, economic growth is expected to moderate to 2% in 2022-23, before slowing to 1.5% by 2025-26. This reflects the unwinding of stimulus spending (particularly in the housing market) as well as the opening of the State’s borders which will see services imports (overseas travel) rise.

While the outlook for the WA economy is strong, there are still significant risks that could see growth revised lower. These include: skills shortages; the continued impact of the COVID-19 pandemic on supply chains; and the war in Ukraine and its impact on commodity markets.

Net Operating Balance, $ millions


Gross State Product, Annual % Change