Iron ore and charged-up housing market adds even more cash to state coffers

The ongoing operation of the mining sector was crucial to the state’s strong finances in the face of the pandemic. Every US$1 per tonne movement in the iron ore over a year moved the state’s royalty income by about $81 million, which means the state coffers will receive $2.08 billion more in royalties than expected just three months ago.

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The boost means 27 per cent of government revenue will come from iron ore royalties this financial year, compared to an average of 18 per cent over the past decade.

Taxation revenue is up $276 million thanks to a stronger real estate market and GST grants have increased $152 million thanks to consumer spending performing better than expected across the whole nation.

General government revenue was now expected to grow by 13.9 per cent more than estimated during the mid-year review but spending has also increased by $850 million.

A large part of that increase can be attributed to housing stimulus measures including the home building stimulus, which was revised up $178 million from December. The first home owners grant was also revised up $41 million.

The state government has also delayed dividend payouts from government trading enterprises to next year, which postponed $1.5 billion of revenue from 2020-21 into 2021-22.

The statement paints a rosier picture for the state’s ballooning debt and operating surpluses over the forward estimates.

Net debt is expected to reach a forecast $40.2 billion by 2024, $1.2 billion lower than forecast in the mid-year review.

The state is expected to record operating surpluses between $1.5 billion to $2.2 billion forecast over the remainder of the forward estimates period.

Under Treasurer Michael Barnes said despite the five-day lockdown and increased risk associated with ongoing restrictions to contain COVID-19, WA’s economic outlook was largely unchanged from the mid-year review, though Treasury had revised its unemployment estimates from 7 per cent to 6.5 per cent over 2020-21.

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The state government will not funnel the bigger surplus into support packages for small businesses as demanded by opposition leader Zak Kirkup over the weekend.

Instead, the government will pump it into its COVID-19 recovery infrastructure program.

“The McGowan Labor Government has allocated every dollar of the strong net operating surpluses to its record infrastructure program, reducing the need for additional borrowings,” WA Treasurer Ben Wyatt.

The state flagged there would be increased costs related to the roll-out of the COVID-19 vaccination program from the end of this month.

So far, the Department of Health has spent $5 million to purchase an additional 1.2 million reusable masks and $1.5 million to develop, manufacture and install touchless hand sanitiser dispenser units in high-traffic public spaces across WA.

The government has also allocated $25 million over 2020-21 and 2021-22 for additional destination marketing to attract domestic and international visitors when COVID-19 travel restrictions are eased.

Treasury is required to publish the pre-election statement within 10 days of the dissolution of the legislative assembly, which occurred on January 29 ahead of the March 13 election.