Iron ore to the rescue again as final budget document highlights WA’s riches

Western Australia’s iron ore sector has poured $529 million more into the state’s coffers than anticipated just 47 days ago thanks to a higher-than-expected price for the commodity and Australia’s weaker dollar.

The enormous budget boost was revealed in WA Treasury’s pre-election financial projection statement, which outlines the lay of the land of the state’s finances ahead of the March 8 election.

WA Treasurer Rita Saffioti.Credit: Jesinta Burton.

The statement signals yet another jump in iron ore royalty revenue thanks to the government under-egging its predictions, and follows jumps in the mid-year review of $1.7 billion in extra iron ore royalties and $1 billion in stamp duty payments, compared to predictions in the May budget.

The state’s operating surplus has been revised up $100 million to $3.2 billion compared to the mid-year budget review released by Treasurer Rita Saffioti on December 23.

That figure only tells half the story, however, with government revenue turbocharged thanks to the extra iron ore royalties plus payroll tax and stamp duty payments.

The iron ore price was revised to US$98 per tonne compared to $US95.3 per tonne in the mid-year review while the US-AUD exchange rate was revised to 64.40c per US dollar, compared to 66 cents in December, due to a recent weakening of the Australian currency as global markets reacted to the Trump Presidency’s deployment of tariffs.

Royalties to WA increase by US$97 million for every US$1 per tonne increase in the price of iron ore.

Because royalties are paid to the state in USD, for every cent the Australian dollar drops against the greenback, WA gets an extra $170 million in royalties.

The extra half a billion dollars in revenue was tempered slightly by an expected drop in iron ore production from 881 million tonnes to 876 million tonnes.

Payroll tax and stamp duty have ballooned by about $140 million, while GST grants were also expected to be $197 million higher.

This financial year’s revenue would have been about a billion dollars higher, but Treasury moved an expected billion-dollar payment from the Commonwealth’s DisabilityCare Australia Fund to 2025-26.

Over the next four years, state revenue was expected to increase $2.7 billion, while expenses were expected to jump $458 million compared to projections in December.

This good fortune will fuel further attacks from the opposition over Labor’s handling of the post-COVID boom, with Liberal leader Libby Mettam continuing to accuse the government of wasting it on projects like Metronet.

In good news for WA households, the statement predicts inflation growth will slow quicker than expected in the mid-year review – from 3.25 to 2.75 per cent this financial year.

Unemployment was also expected to hit 3.5 per cent rather than 4 per cent in the mid-year review.

However, the statement did contain dire warnings about the impact of a US trade war on WA’s trade-exposed economy, and the impact the state’s growing prison population could have.

“Growth in Western Australia’s prison population has been faster than anticipated at the time of the mid-year review cut-off, as such, there is a risk that the prison population over 2024-25 (and beyond) will be higher than forecast,” the statement said.

“The associated cost and funding implications will need to be firmed up over coming months, and considered as part of the 2025-26 budget process”

Speaking on her last budgetary document of this term, Saffioti said no other state in the nation had achieved what WA had under Labor.

“With a triple-A credit rating from both Moody’s and S&P Global, as well as six consecutive budget surpluses since 2018-19,” she said.

“Importantly, our strong surpluses have been maintained while investing record amounts in health, education, housing and homelessness and infrastructure, as well as providing record cost of living relief to Western Australian households.”

But shadow treasurer Steve Martin took aim at the government’s management of cash flow, with Treasury pointing out that the next government would need to introduce a new treasurer’s advance bill to cover $1.5 billion in costs above what the previous bill allowed.

A treasurer’s advance is authorised by WA parliament and gives authority to the government of the day to access funds to meet urgent spending claims.

“Labor’s inability to control spending is on full display with the release of the pre-election financial statement,” Martin said.

“Labor has blown the treasurer’s advance by almost $1.5 billion and the limit will need to extended as a ‘priority’ when parliament resumes.”

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