Record contributions from the mining and resources sector have helped lift Western Australia to a State Budget surplus of $5.6 billion.
The surplus is $2.5 billion higher than the figure initially predicted by Treasury in February due to $11.3 billion in royalties paid by the State’s iron ore industry.
Western Australia Premier and Treasurer Mark McGowan said the resources sector’s ability to continue operating throughout the COVID-19 pandemic amid strong commodity prices had been a pivotal factor in the State’s strong economy.
“Our decision to keep the mining industry open safely has been a massive benefit to the WA economy and also the national economy, with the Commonwealth and Eastern States benefiting from billions in additional company tax receipts,” McGowan said.
Chamber of Minerals and Energy of WA policy and advocacy director Rob Carruthers said projected royalties totalling $10.9 billion in 2021-22 reflected the exciting opportunities being realised by the WA mining and resources sector.
“This projected royalties figure will also eclipse the previous record,” Carruthers said.
“Iron ore is the commodity most associated with WA and it’s good to see forecast royalty revenue from that of $9.2 billion next financial year – noting the State has been prudent to project iron ore prices declining slightly from where they currently are and then returning to their long-run average over forward estimates.”
Carruthers said he expected the resources sector would continue to boost the WA economy into the future.
“Royalties from most major commodities are expected to increase in 2021-22, including nickel, copper and lithium, bearing out the extremely bright future for WA that is predicted in the battery minerals and new energy space,” he said.
“With some $140 billion of projects currently in the WA mining and resources pipeline, it’s certainly a very exciting time for our sector and for WA as a whole.
“Our shared challenge is to maximise on these opportunities, and government has a vital role in providing the competitive foundation for large-scale investment.”
However, Chamber of Commerce and Industry Western Australia chief economist Aaron Morey said there are significant risks to the State’s Budget position.
“These include the iron ore price, a renegotiated GST deal and a lack of expenditure restraint, especially in relation to public sector wages,” Morey said.
“The forecast iron price of $US121.30 for this financial year may prove optimistic, given the current downward pressure on the price.
“We anticipate this will be offset in the longer term by the adoption of a $US66 price, the long term average, out till 2025.”
Carruthers said the resources sector had negotiated several challenges over the past 12 months.
“The $12.7 billion in royalties, North West Shelf grants and lease rentals generated by mining and resources sector operations were the State’s biggest single revenue stream in 2020-21,” Carruthers said.
“Indeed, these contributions totalled more than 31 per cent of all WA Government revenue and increased 36 per cent on the previous financial year.
“We’re very proud of the way our sector has been able to continue operating safely and effectively despite the ever-present challenges associated with COVID-19, generating benefits for communities right across Western Australia and contributing significantly to job creation in the State.”