Iron ore, GST boost WA budget

Western Australia’s $5.6bn operating surplus is good news for the state and the nation. It will allow Premier Mark McGowan, who appointed himself Treasurer after the election last March, to address the state’s ramshackle health system, which his government has allowed to run down to a shameful and dangerous extent. The budget, released on Thursday, boosts health and mental health spending by $1.9bn. The surplus also will fund worthwhile action on climate and the environment. Measures announced include ending the logging of native forests; supporting the development of a renewable hydrogen industry; and planting up to 50 million pine trees, sequestering at least 7.9 million tonnes of carbon, creating hundreds of jobs and providing certainty for the construction industry. WA’s unemployment, the lowest of any state at 4.6 per cent, is at its lowest level in more than seven years. Job vacancies in WA are at a level not seen since the last iron ore boom of a decade ago. With the economy going gangbusters, the McGowan government is in the fortunate position to delay more than a dozen infrastructure projects by 12 months to smooth out the pipeline of work.

True to his rambunctious outlook, Mr McGowan was determined to use the encouraging figures to justify his isolationist policies. The record-breaking surplus, he suggested, reinforced the importance of the state’s tough border approach. The figures in the budget papers tell a different story. Iron ore royalties, not isolationism from the rest of the nation, provided a $11.3bn windfall, underlining the importance of the nation’s largest export industry. As Paul Garvey reports, WA’s position also is being bolstered by its increasing share of GST revenues. Under the deal struck in 2018 between the McGowan and Turnbull governments, WA is guaranteed to keep at least 70c of every dollar of GST it raises. The deal will add more than $4bn in extra funding to the state in 2023-24, when its share of GST revenues would have fallen to a miserly 10c in the dollar under the old system. Other states may push for an overhaul of the formula earlier than the scheduled review in 2025. But WA’s iron ore bounty may prove volatile. Treasury is anticipating a fall in iron ore prices to $US66 a tonne, after it earned more than $US200 a tonne for much of the past 12 months. The priced is currently sitting at $US130 after China reduced steel production.

The more pressing issue, as Scott Morrison says, is for WA to step up vaccinations and open up. Mr McGowan was having none of it on Thursday. WA’s financial strength, he claimed, was supporting other parts of the country: “Look at NSW and Victoria, it’s terrible in a health sense and it’s terrible in an economic sense.” But both states, especially NSW, are well on the way to reopening. Mr McGowan has flagged leaving WA’s hard border in place until next year, when he anticipates setting a date to reopen when vaccination levels reach 80 to 90 per cent. But WA is not a hermit kingdom; it is part of the federation. It cannot avoid reopening indefinitely. As the Prime Minister says, the state needs to get its hospital system ready, push through, “and we can all reconnect and be one again”.