Ripper plays down WA minerals boom

The West Australian government has played down its windfall from the mining boom after delivering another $2 billion budget surplus.

The budget, brought down on Thursday, contained tax cuts designed to help home buyers and modest payroll tax cuts for business, but few other sweeteners for voters ahead of an election expected to be called this year.

Premier Alan Carpenter and Treasurer Eric Ripper sold the budget as a long-term investment in the future, saying it would sustain the state's prosperity with unparalleled investment in economic and social infrastructure.

The $2.093 billion operating surplus estimated for the current financial year to June is slightly below the $2.256 billion surplus recorded for 2005-06 but above last year's result of $1.853 billion.

A surplus of $1.885 billion is projected for the 2008-09 financial year.

The current year marks the state's third successive year of economic growth above six per cent.

In attacking the budget, the opposition zeroed in on an estimated surge in net debt from $3 billion in 2006-07 to $11.4 billion over the next four years.

Opposition treasury spokesman Steve Thomas said the government had "blown" a string of surpluses in the $2 billion range fuelled by the mining boom since 2003.

He said budget blowouts in major infrastructure projects like the new Fiona Stanley hospital, the planned 60,000-seat Perth sports stadium and the redevelopment of the Perth foreshore would increase debt and threaten the state's AAA credit rating.

Mr Ripper said the budget surpluses would begin to fall after next year, leading to a $203 million surplus in 2011-12.

Falling iron ore prices, a lower share of the GST and a "massive" infrastructure program meant the government would need to increase its borrowings, he said.

But key mining industry associations say iron ore prices will remain strong for many more years than the government is predicting.

Mr Ripper said he had been advised the mining boom could continue for up to 10 years, but not at "its current high peak".

"We're expecting iron ore prices to fall by about 25 per cent in 2011-12," he told Fairfax Radio Network.

"Even then they'll be three times higher than they were in 2003-04 ... so they'll still be pretty strong, but we will have come off the peak.

"In this year's budget, we're assuming a 67 per cent increase in iron prices, which will deliver us more than $800 million in additional revenue this year.

"But, ultimately, iron ore prices will plateau and fall, and that's why we're looking at a surplus of just above $200 million in four years' time."

The "big hit" affecting WA finances was a reduction in the state's share GST revenue, he said.

"By 2011-12 we'll have 10.3 per cent of the nation's population but only 6.2 per cent of the GST," Mr Ripper said.

"So $6 billion is going to be taken off our finances over that four or five years."

Asked if the GST revenue would outstrip expectations due to higher fuel prices, Mr Ripper said the commonwealth's GST distribution formula meant the state would receive less.

"From $4 billion in GST we'll be down to $3.2 billion - it's not only less percentage share but less actual dollars from the GST," he said.

"Our royalties ... only apply to oil and gas that's found on WA land or in WA waters.

"Most of the big new developments are in fact in commonwealth waters and so the royalties go direct to the commonwealth government.

"Even if the royalties do come to us, they get redistributed to other states via the GST.

"Whereas the oil price used to be a big factor in budgeting in the early years of the (WA) Labor government, the big factor now is iron ore."