PERTH (miningweekly.com) – The Western Australian government is predicting a surplus of A$5.6-billion for 2020/21, driven by a strong economy and increased revenues from the resources sector.

For 2021/22, the state government is currently predicting a surplus of A$2.8-billion, with strong surpluses expected to continue across the forward estimates. 

The state's net debt is expected to fall for a third consecutive year in 2021/22 to A$32.1-billion.

“Our financial capacity has been bolstered by higher revenues across a range of sources as a result of our strong economy, including increased royalties from a higher iron-ore price. However, as we know, the iron-ore price is extremely unpredictable,” said Premier Mark McGowan on Thursday.

“We will continue to keep the budget healthy to deliver quality services and infrastructure, keep fees and charges low and respond to crises as they emerge,” he said.

In his Budget speech, McGowan confirmed that the mining and resources sector’s ability to continue operating throughout the Covid-19 pandemic amid strong commodity prices had been a pivotal factor in the state’s healthy economic results and outlook.

Western Australia’s Chamber of Minerals and Energy said the mining and resources sector had negotiated several challenges over the past 12 months, including the continuing impact of Covid-19 and an ongoing skills shortage affecting multiple industries, but remained the cornerstone of the Western Australian and Federal economies.

“The $12.7-billion in royalties, North West Shelf grants and lease rentals generated by mining and resources sector operations were the state’s biggest single revenue stream in 2020/21,” director of policy and advocacy Rob Carruthers said.

“Indeed, these contributions totalled more than 31% of all Western Australian government revenue and increased 36% on the previous financial year.

“We’re very proud of the way our sector has been able to continue operating safely and effectively despite the ever-present challenges associated with Covid-19, generating benefits for communities right across Western Australia and contributing significantly to job creation in the state. It’s telling that employment grew 1.7% in WA in 2020/21 in the face of the pandemic and jobs in mining and resources were a major part of that.

Carruthers said that the revenue provided by the resources sector allowed the Western Australian government to make vital investments in the state’s health and education systems and other essential services.

“Western Australia’s economy is set to grow faster than it has at any time since 2013/14 and we are delighted by the contribution mining and resources will make to that.”

Carruthers said projected royalties totalling A$10.9-billion in 2021-22 reflected the exciting opportunities being realised by the Western Australian mining and resources sector. This would contribute to a forecasted A$2.8-billion operating surplus for the state.

“This projected royalties figure will also eclipse the previous record,” Carruthers said.

“Iron-ore is the commodity most associated with Western Australia and it’s good to see forecast royalty revenue from that of A$9.2-billion next financial year, noting the state has been prudent to project iron-ore prices declining slightly from where they currently are and then returning to their long-run average over forward estimates.

“Royalties from most major commodities are expected to increase in 2021/22, including nickel, copper and lithium, bearing out the extremely bright future for Western Australia that is predicted in the battery minerals and new energy space.

“North West Shelf Grants are also projected to increase by more than A$200-million in 2022/23.

“With some A$140-billion of projects currently in the Western Australian mining and resources pipeline, it’s certainly a very exciting time for our sector and for the state as a whole.  Our shared challenge is to maximise on these opportunities, and government has a vital role in providing the competitive foundation for large-scale investment.”

The Association of Mining and Exploration Companies (Amec) pointed out that with A$120-million committed for approvals officers, and A$12.5-million for the Exploration Incentive Scheme, the state Budget included a range of initiatives that would benefit the mining and mineral exploration industry.

A further A$5-million was provided to complete Kalgoorlie’s Joe Lord Core Library and A$6.3-million for the Minerals Research Institute of Western Australia to keep Western Australia on the cutting edge of mineral research. A$1-million has also been provided for research into the viability of a local green steel industry.

Additionally, further funding has been supplied for an additional mining warden.

“The Western Australia mining and mineral exploration sector continues to benefit from the combination of opportunities, high commodity prices, record levels of investment and a lack of Covid-19 in the community,” said Amec CEO Warren Pearce.

“There are at least twelve mines in near-term development in Western Australia, which combined with strong residential and civil construction growth, will generate further pressure in the economy.

“The state government's record A$30.7-billion investment in public infrastructure is also competing for staff, equipment and materials with the private sector. This is often the case, and in more ordinary times is not usually a major concern.

“However, in an economy that has only 4.6% unemployment and ongoing border restrictions, we are already seeing significant labour shortages.

“With a range of industries experiencing heady growth, the risk of the economy over-heating continues to grow. This is certainly a good problem to have, but it is still a problem.

“There is a high demand for people, skills and materials in Western Australia, which means that both government and industry projects will likely face delays and increased costs, and there is the further risk that inflationary effects may escape these industries, and add to cost of living pressures across the community,” Pearce said.

“Finding a safe way to bring interstate and international workers into Western Australia will be the most effective way to relieve these pressures.

“Despite these potential challenges, the 2021/22 Budget clearly evidences that Western Australia is strongly positioned to continue to grow in a post Covid-19 environment,” said Pearce.