In an update to Parliament, Western Australian Treasurer Ben Wyatt provided a preliminary assessment of the impacts of the COVID-19 pandemic on the state’s economy and finances.

Treasury baseline modelling has revealed that the state’s gross state product will contract by 5.1 per cent in the June quarter 2020, which will have the effect of reducing forecast growth to 0.7 per cent in the 2019-20 financial year.

A further 3.1 per cent contraction is expected in 2020-21.

If realised, this would fulfil the commonly held consensus definition of a recession, which is recognised as two consecutive quarters of economic decline.

A return to growth is expected in 2021-22, the Treasurer did reveal, despite conceding that “forecasts should be treated with caution given the high level of uncertainty of the depth and duration of the ongoing effects of COVID-19 on the state, national and international economies”.

Stating that there has never been any doubt that the impact of the crisis on the Western Australian economy and state finances would be severe, Mr Wyatt said the state “is not immune to the global economic shock caused by COVID-19, despite our strong health response to the pandemic”.

Treasury has indicated that royalty collections have remained relatively stable during the pandemic, but significant downturns are forecast across revenue sources such as GST grants, payroll tax, transfer duty, land tax and vehicle licence duty.

All in all, total general revenue over this financial year and next financial year is expected to be around $1.8 billion lower than was outlined in the 2019-20 mid-year review.

An increase in COVID-19 related expenditure and the reduced revenue will weigh heavily on the operating surplus of $2.6 billion that was also forecast.

Despite the grim forecast, economic recovery will be the main priority of Western Australia’s forthcoming budget.

“In the lead-up to the state budget in October, the McGowan government will be solely focused on growing the economy, and supporting WA businesses and jobs,” Mr Wyatt flagged.

He outlined that to date, “the McGowan government has committed $1.8 billion in support measures for households, small and medium businesses, community services and front-line service delivery agencies in response to the initial impacts of COVID-19”.

The economic recovery plan, which includes three key elements, is already underway.

Mr Wyatt said restrictions will progressively be eased in accordance with expert health advice that will allow businesses to reopen and people to get back to work safely, while targeted investments have already begun, which aim to restore the economy’s growth trajectory as quickly as possible.

“In addition, reforms will be made to cut red tape, lift our growth potential and strengthen our economy,” he concluded.