PERTH (miningweekly.com) – The resources sector is forecast to inject some A$5.9-billion into Western Australia’s economy in 2018/19, with the sector continuing to be a major driver in the state’s economy.

The mining industry contributed some A$5-billion, or 17%, of Western Australia’s total revenues during 2017, the state Budget revealed on Thursday, with the sector employing about 110 000 people.

After contracting by 2.7% in 2016/17, the Western Australian economy is estimated to grow by 2.5% in 2017/18 and by a further 3.25% in 2018/19, largely fueled by exports of these key commodities.

Chamber of Minerals and Energy acting CEO Nicole Roocke said the state Budget demonstrated that when the resources sector is doing well, the state of Western Australian does well, given the vital role the resources sector plays in strengthening the economy and creating jobs for Western Australians.

“With increases across most commodities, royalties from the resources sector are forecast to inject A$5.9-billion into the Western Australian economy in 2018/19, significantly boosting the government’s efforts to reduce state debt, which is projected to reach A$36-billion,” Roocke said.

“Western Australia’s liquefied natural gas (LNG) exports are projected to increase by around 70% in the three years until 2019/20 to almost 50-million tonnes accounting for around 10% to 15% of expected global production.

“Lithium is also shaping up to be an emerging area of strong growth and expected to contribute a growing share of mineral production and exports in the next four years.”

Roocke said that given the resources sector’s significant contribution to the state’s finances, it was essential the government did not move to introduce any increase in royalties and taxes in future years that would cripple exploration and threaten job growth and investment in Western Australia.

“Such a move would be counterproductive when you consider the majority of any royalty increase is taken out of Western Australia through the goods and services tax (GST) system. For example, 70% to 80% of lithium royalties will be redistributed to other states through GST.”

However, she pointed out that the 2018/19 state Budget included several measures that would place cost pressures on the sector, including a yearly 6% increase in mining tenement rents over the next two years, resulting in the industry self-funding the Exploration Incentive Scheme (EIS), an additional A$25-million in state coffers through the removal of the sector’s exemption from the Building and Construction Industry Training Fund levy, and additional revenue through cost recovery for environmental regulation services undertaken by the Department of Water and Environmental Regulation.

The government would also continue to increase payroll tax over the next four years, which would be paid largely by Western Australia’s iron-ore industry.

The state government pledged A$10-million a year to the continuation of the EIS, extending the scheme from 2019/20, which will be funded through the increased mining tenement tax rate.

The government also introduced an improved cost recovery model for environmental regulations, which is expected to generate A$19.4-million over the next four years for the agency.

The additional revenue will be used to employ additional staff and also invested in online systems to create a streamlined online application process to improve the timelines of decision-making on environmental approvals.

The Association of Mining and Exploration Companies (Amec) said on Thursday that while the changes to the EIS were disappointing, it welcomed the fact that there were no proposed changes to the royalty regime.

“This reflects responsible financial management by the state government. In a volatile global market, companies need certainty in the future of the royalty regime to make long-term investment and business decisions,” said Amec CEO Warren Pearce.