Mike Nahan. Picture: The West Australian/Megan Powell

WA's new Treasurer Mike Nahan has declared that pay rises for public servants are over, saying future wage adjustments will be limited to cost of living increases.

Dr Nahan says WA's iron ore royalties are "risky as hell" and the Barnett Government must run much larger Budget surpluses than it has to date to guard against the volatility.

In his first extensive interview since replacing Troy Buswell as Treasurer on Monday, Dr Nahan yesterday told _The Weekend West _the Government had no choice but to put the brakes on spending after a decade of 8.2 per cent annual average growth.

"It's what's required," he said of bringing down expense growth to the 2.5 per cent range forecast in the Budget forward estimates.

"On the revenue side (of the Budget), we have no upside - none whatsoever.

"We have the highest expenditure per capita in the country.

"On education, we spend 25 per cent more per capita, on health we're about 10 per cent above the rest of Australia."

Dr Nahan will hand down a State Budget in two months that was largely crafted before his swearing in by Governor Malcolm McCusker, though he has had input as Finance Minister.

It is believed the Government could be the beneficiary of some revenue upside in the current financial year but the Budget will be mostly bereft of any radical surgery.

Asked if characterising the Budget as "business as usual" was accurate, Dr Nahan said: "That's fair."

Its focus will be on bedding down the fiscal action plan announced by Mr Buswell last August and in December's mid-year review. "We announced major changes last year; we're consolidating them," he said.

"The big issues are still there - wages, putting off some asset investment. We've already made the big deferrals."

Dr Nahan admitted government spending on wages had blown out over the past 5-7 years but this had been necessary to "meet the market" amid skills shortages.

"Wages are moderating in the rest of the economy, sharply," he said. "Wage expectations in the public sector have to moderate accordingly."

Dr Nahan said the risk to the Budget of an iron ore price slump was "real" and that if this occurred, WA would not be compensated through the GST system for at least three to five years.

Asked if the Budget was now too reliant on royalties - which have grown to 21 per cent of State revenue from about 10 per cent five years ago - he said: "I have to live with reality. We live in a risky world."


The West Australian

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