WA's Treasurer has taken the axe to Government spending, ordering all departments to find hundreds of millions in savings to help keep next month's State Budget in surplus.
Mike Nahan is likely to face more pressure to cut even deeper with predictions WA is headed for an economic slowdown - the likes of which have not been since the global financial crisis.
Department heads were told last week they need to slash 5 per cent from their capital works budgets each year for the next three years.
And The West Australian understands some departments have already begun assessing which projects will have to be scaled back or even delayed indefinitely.
But the Budget pain does not stop there.
Departments have also been instructed to trim millions from their procurement budgets.
It is understood no department has been exempted from the belt tightening, including core services such as health, education, and police.
Dr Nahan refused to discuss specifics of the May 8 Budget yesterday, but confirmed it would contain what he called new "efficiency measures".
"We are stepping up measures, adding new ones and tightening existing ones to drive greater efficiency in the delivery of Government services," he said
Dr Nahan has previously told _The West Australian the Government will "do what it takes" to keep the Budget in surplus in the face of dwindling revenue streams.
But the Treasurer insisted yesterday that services would not suffer as a result of any new cuts and he claimed that in some areas service delivery would improve.
"We will maintain, indeed enhance, the efficiency of core services, but we will also enhance the volume of delivery of services," he said.
Opposition Leader Mark McGowan said the Government was living in dreamland.
"You cannot cut money out of education, child protection, transport and hospitals and not expect services to suffer," he said. "We've had record broken promises, record cost of living increases and record cuts to core services. It is an amazing record."
A report by Deloitte Access, due out today, predicts gross State product will grow just 1.6 per cent next financial year. It would be the slowest growth in overall economic activity since 2008-09.
Unemployment is tipped to climb to 6.1 per cent in the coming year, higher than any time during the GFC, while the commercial construction sector is forecast to contract more than 10 per cent.
Two years ago the construction sector was growing more than 10 per cent.
A higher-than-forecast Australian dollar has also wiped $420 million from iron ore royalty projections and a drop in stamp duty and payroll taxes has put further strain on the Budget bottom line.
Even a slowdown in population growth, which has added to Government costs in areas such as education, will hit revenues in real estate and stamp duty.
Deloitte said the economic handover from the construction side of the resources boom to its production phase would make the coming financial year a tough one for WA.
"For Australia as a whole, the baton pass may not be smooth. For WA - whose construction surge has been much larger - the baton pass looms even larger as an issue," it said.
"WA remains the best-performing economy in the nation, but only just," CommSec chief economist Craig James said.