Mike Nahan has ordered a freeze on public sector hiring.

Treasurer Mike Nahan has ordered immediate freezes on public sector hiring and government advertising until at least July 1 as he tries to protect a slim Budget surplus under stress from dwindling revenue.

And Dr Nahan is adamant that the Government, which faces pay negotiations with the unions for public servants, school teachers and police, must hold the line on maximum annual pay rises of 2.5 per cent a year, declaring "failure is not an option".

_The West Australian _can reveal the persistently high Australian dollar has forced Treasury to write down its forecasts for iron ore royalty revenue by $420 million over the next four years, with most of that revenue loss "front-loaded" in the next two Budgets, putting further strain on the bottom line.

The rookie Treasurer's financial problems are being compounded by revenue weakness across the board, with payroll tax receipts failing to grow as quickly as the Government had hoped as the mining investment boom winds down and jobs disappear.

Stamp duty collections are also weak, with less than expected revenue from the residential property market and a lack of big, multimillion-dollar commercial property transactions.

"This is going to be a particularly difficult Budget for us," Dr Nahan said.

"All our own-source revenue is below expectations and below the rate of growth in the (recent) past. And our royalty revenues have taken hits because prices are lower and the exchange rate is much higher."

Asked if the Budget might slip into deficit, Dr Nahan said: "We're fighting like hell to (deliver) a surplus. It's not easy. That's why we're introducing these measures. We'll do what it takes."

The Australian dollar was buying about US93.8¢ last night, compared with forecasts in Treasury's midyear update of 92.3¢ throughout 2013-14 falling to 85.2¢ by July 2017.

Despite a $500 million lift in GST revenue in 2014-15 because of Federal Treasurer Joe Hockey's decision on the treatment of iron ore fines, it is understood WA Treasury still believes WA's share of the GST will fall to 10¢ in the dollar by 2017-18.

The hiring freeze, to be announced today, means about 600 vacant government jobs will not be filled until further notice. The Government will only permit advertising that is already booked, which means the latest round of its Bigger Picture campaign on health spending will continue.

The freezes are in place until July 1 but could be extended, depending on the Government's overall financial performance.

Dr Nahan said the Government would be judged on its performance in controlling expenditure growth, which is estimated at 9.3 per cent this financial year but must fall to 2.4 per cent next year, according to Treasury.

Keeping wage growth to 2.5 per cent was the Government's "biggest challenge".

"Over the last four years, wage growth in the public sector has exceeded the private sector - that's including the cashed-up bogans - so we have not been starving our public sector," Dr Nahan said. "Across the board they are the highest-paid in the nation."

He did not rule out further deferrals to the Government's $7 billion-a-year infrastructure program but said there would be "no big surprises", with the most contentious decisions including MAX light rail and the airport rail already announced in December's midyear review.

He hosed down expectations about widespread asset sales, saying there would be no decisions on electricity privatisations before a review of the power market is complete late this year.

The West Australian

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