WA has been in the fortunate position of being able to engage in largely normal business and community activities, with only 12 days of lockdown over 2021. Sustained levels of consumer and business confidence supported strong retail trade, and business and dwelling investment, and cushioned the impact of the pandemic on the WA economy.  

This has resulted in strong economic growth: the domestic economy grew by 4.4 per cent in 2020/21 and is forecast to grow by a further 5 per cent in 2021/22.

Investors have been mindful of WA’s ongoing level of economic activity underpinning strong taxation and royalty revenues, and resulting in operating surpluses forecast across all budget years.

While commodity prices remain vulnerable to global conditions, conservative forecasts for the iron ore price and US dollar-Australian dollar exchange rate have ensured the budget can withstand the recent price movements.

Investors welcomed the recognition of this unique fiscal and economic position in the positive outlook to the state’s rating by S&P Global Ratings.

The 2021/22 mid-year financial projections statement saw a reduction in the new money requirement for 2021/22, with A$300 million (US$214.5 million) of new funds now anticipated in 2021/22 and A$100 million in 2022/23.

These figures incorporate the funding required to support the record A$32.7 billion asset investment programme over 2021/22 to 2024/25. This is up by A$2 billion from the programme included in the 2021/22 budget.

While best endeavours are being made to ensure the infrastructure is delivered as planned, ultimately the timing of the programme will be influenced by a number of factors and any underspend may reduce WATC’s immediate funding task. However, underspends may be reallocated to other years across the forward estimates period, resulting in slightly elevated new money requirements in the out years relative to current budget estimates.

The WA government recently released an information pack articulating the state government’s ESG credentials. The information pack builds on WA’s commitment to achieving the Paris Agreement objective of net zero emissions by 2050 and also recognises the importance of contributing to Australia’s pursuit of the objectives of the UN Sustainable Development Goals.

As articulated in the ESG information pack, a key aspect WATC is now pursuing to support the state government in achieving its objective of continuous improvement in ESG outcomes is the development of a sustainable bond framework to allow for ESG issuance, subject to market conditions and the state’s overall borrowing strategy.

WATC is watching evolutions in the ESG market domestically and offshore closely. We are particularly interested in the ongoing evolution in reporting obligations, terminology and investor appetite for financing a mix of social and green assets that will inform the future design of our ESG issuance programme. Investor interest in local ESG issuance, particularly the extended tenor we have seen in recent domestic syndications, is also a promising trend.

Following the release of the 2021/22 WA state budget, WATC announced its intentions to launch a new floating-rate note in the five-year maturity band and a new benchmark bond maturity between our current 2031 and 2034 lines, subject to funding requirements. At the present time these intentions remain valid.

In addition, WATC will continue to support existing lines, including nonbenchmark lines, as required to support client funding needs.