THE West Australian government has flagged the boom state's first deficit in 13 years, sparking calls for a complete review of capital expenditure programs.
In its Mid Year Economic Review, released on Friday, the state's books were tipped to slide into the red by $187 million in 2013/14 with the softening in mining royalties expected to continue.
That would follow an expected surplus for the current financial year of $140 million, down $56 million from budget estimates.
Treasurer Troy Buswell said it had become increasingly evident the WA economy was faced with "structural challenges" in commodity and foreign exchange markets - so much so that it had changed its forecasting methodology.
For instance, the WA government previously assumed the iron-ore price would return to its long-term average within four years but had stretched that out to 10 years, and believed commodity price volatility had become the new norm.
Mr Buswell said he was confident that the looming deficit could be avoided - if revenue projections proved too pessimistic and if spending was curbed - but opposition treasury spokesman Ben Wyatt said it was impossible.
"There's no way he's going to correct it in just one (financial) year," Mr Wyatt told reporters.
Mr Wyatt was also damning of the state government's projected steady rise in net debt over the forward estimates to $24.76 billion in 2015/16 - despite its previously stated pledge to cap debt at $20 billion.
"Troy Buswell has presided over average expense growth of 10 per cent every year that Colin Barnett has been premier," Mr Wyatt said, adding that it was time for the scandal-prone minister to go.
"When a treasurer can stand up during one of the state's great boom times and produce books that forecast a deficit in two years' time, it's time for that treasurer to acknowledge and for the premier to acknowledge that he's not focused on the job, he's more interested in part-time gags.
"I think every Western Australian who will be paying for this set of financial books for a long time yet were expecting a lot more."
Mr Buswell said the higher debt levels were needed to meet the infrastructure and services demands of a growing population, with some 1500 new arrivals in WA each week, and that managing expense growth was a core priority.
But the Chamber of Commerce and Industry of WA's chief economist John Nicolaou said the next WA government - given the state election was set for March - should commit to doing a full review of capital expenditure programs "to ensure the lion's share of the burden of balancing the books isn't left to business".
"Efficiency dividends will only go so far before a complete review of programs is required," Mr Nicolaou said.
"Net debt levels will remain a key challenge facing an incoming government, to ensure WA retains its AAA credit rating and the ability to fund election priorities."
Ratings agencies on Thursday warned that the state was at risk of losing its AAA credit rating due to high debt levels.
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