By Peter Milne
Treasurer Rita Saffioti’s first WA budget was supercharged by high iron ore prices, with royalties expected to put $9.85 billion into the state’s kitty this financial year, an enormous $3.5 billion more than expected.
Royalties from the Pilbara’s steelmaking ingredient were a welcome 21 per cent of total revenue for a state soon to hit three million people. Its true impact is greater with an indirect effect on other revenue streams like payroll tax and stamp duty.
Treasurer Rita Saffioti gives her first budget speech.Credit: Nine News Perth
However, the danger to WA if its price fell dramatically is not lost on Saffioti, who delivered her first budget on Thursday, the eighth since Labor came to power.
The budget papers note that the board of WA’s biggest iron ore miner Rio Tinto, on which former Labor state treasurer Ben Wyatt sits, has committed $6.2 billion to its giant Simandou iron ore mine in Guinea. Some have dubbed the project a potential “Pilbara killer”.
“A big challenge for us is to make sure we continue to diversify our economy to ensure we have a strong revenue base in the future,” Saffioti said.
To avoid future WA treasurers presiding over budgets that look decidedly Victorian, WA Labor is diverting some of that iron ore cash to bolster the growth of other minerals.
“One of the key things in relation to WA is that you have to invest to create jobs and sustain economic development,” she said.
“If you don’t invest in improving your productivity you have inbuilt further costs”.
A $500 million strategic industries fund will boost common user infrastructure for the government’s strategic industrial areas: large tracts of land reserved for industrial development that are largely barren as no company wants to be the first tenant hit with the bill for basic infrastructure like roads, water and transmission connections.
Committee for Economic Development of Australia chief economist Cassandra Winzar backed the fund but warned it had to be well spent.
“Supported projects must have clear objectives and include measures to simplify planning and approvals processes across governments,” she said.
“An attractive business environment is critical to encourage investment in diverse products, industries and export markets.”
The state government has also put up $100 million, provided it is matched by the Commonwealth, to invest in a state-owned common user advanced processing facility for critical minerals.
To help minerals processing use electricity from wind and solar generation energy instead of gas $324 million will go to expanding the power grid in the south-west and another $148 million will bolster the Pilbara grid.
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