Article by Josh Zimmerman courtesy of the West Australian.
Treasury coffers bursting with iron ore windfall.
Iron ore alone has generated about $30 billion worth of royalties during Premier Mark McGowan’s four years in charge – nearly double what the State raked in during the previous term of government.
An analysis of the past eight budgets lays bare the extent of the iron ore windfall enjoyed by Mr McGowan, with today’s fiscal papers expected to confirm the steelmaking commodity tipped $11b into WA’s coffers in the past year alone.
That would boost the total value of iron ore royalties to just over $30b since 2017 compared to $17.8b during former premier Colin Barnett’s last term in office.
The McGowan Government has made a habit of pencilling in conservative iron ore prices when putting together its Budgets, resulting in royalties of $8.5b above what was predicted over the past four years. The period has also coincided with a GST top-up that has returned $4.9b to WA since 2018.
Chamber of Commerce and Industry WA chief economist Aaron Morey said a range of factors had lined up in the State’s favour since 2018 to pour money into Treasury.
“We saw iron ore supply disruptions out of Brazil, a strengthening in Chinese demand and more recently in response to COVID basically every government across the world is stimulating its economy through infrastructure which requires steel,” Mr Morey said.
In May, the iron ore spot price topped out at a whopping $US233 a tonne and it ended 2020-21 averaging $US149.30 more than $US50 higher than the McGowan Government had predicted in last October.
The incredible price run meant BHP alone contributed $3b in royalties to WA in 202021, as revealed in the miner’s annual national economic contribution report.
WA collected the biggest share of royalty cheques paid by BHP in Australia, with resources interests in NSW, South Australia and Queensland delivering a combined $587m to the respective State governments.
CCIWA used its pre-Budget submission to push the McGowan Government to “lay the foundations for opening up to the rest of the world” and diversify the economy to rely less on the resources sector.
Mr Morey said there was no single “panacea” for reform but highlighted payroll tax as a key area holding back investment in non-mining industries in WA. “Once (a WA business) hits 25 workers it faces the highest payroll tax in the country,” he said.
The chamber advocates for increasing the payroll tax threshold from $1m to $1.2m, with a 15 per cent rebate for firms with taxable wages below $4m – which Mr Morey said would cost the Budget about $170m annually.
Mr Morey said he was particularly interested in key assumptions contained in today’s Budget – namely the reopening of borders and the use of lockdowns in the event of future COVID out breaks.
Once (a WA business) hits 25 workers it faces the highest payroll tax in the country.