What’s in the budget for WA (that hasn’t already been announced?)

Tuesday’s federal budget was a cash splash aimed at shoring up support for the Coalition ahead of May’s federal election right across the country, but it contained some interesting cherries for West Australian voters – and an insight into the state’s fortunes.

Federal Treasurer Josh Frydenberg and Finance Minister Simon Birmingham.Credit:James Brickwood

Iron ore prices to fall

The Commonwealth is not convinced the iron ore price will continue at its current high levels over the next six months.

The price currently sits at more than US$150 per tonne, but the budget assumes this will decline from US$134 per tonne to US$55 per tonne by September.

It also predicted mining exports would grow by 5 per cent over the next year as production disruptions eased and new iron ore mines – such as BHP’s South Flank, Rio Tinto’s Gudai Darri and Fortescue Metals Group’s Eliwana projects – begin ramping up.

The impact of China on iron ore trade had the budget authors in two camps.

“Strength in fixed asset investment in China, spurred by loosening fiscal and monetary policy may mean iron ore prices stay higher for longer than expected,” the budget read.

“On the other hand, a faster-than-expected slowdown in the Chinese economy, such as due to economic disruptions from a widespread COVID-19 outbreak, could push the prices of Australia’s key exports lower than assumed.”

Ratings agency S&P predicted WA’s budget would post a record-breaking surplus of nearly $8 billion this year because of the higher-than-expected iron ore prices.

The Ukraine war has had a huge impact on the prices of other WA commodities including gold, aluminium and nickel but the budget predicts these will also ease back to their long-term levels by September.

A ‘green Pilbara’?

One of the most significant budget announcements for WA that had not already been announced by the state government was a $1.5 billion cash splash in the Pilbara over the next decade to turn the region into a steel-producing and renewable energy exporting hub.

The funding forms part of a nationwide $7.1 billion energy scheme and will see $200 million spent on increasing onshore processing and “value-add” of iron ore exports, to support low-emissions steel production in Indo-Pacific customer countries like Japan and Korea.

Another $200 million will be spent on building hydrogen and ammonia manufacturing facilities as well as carbon capture technology in the Pilbara, while about $100 million will be spent on encouraging private sector investment to improve energy supply and capacity.

The ghost of Roe 8

The Commonwealth continues to dangle a $1.2 billion carrot in the budget papers for the WA government to build Roe 8.

“The Australian Government remains committed to the extension of the Roe Highway, despite the decision of the Western Australian government not to proceed with the project,” the budget papers read.

“To this end, the Australian Government will provide $1.2 billion to the first WA government willing to construct the Roe 8 and 9 extension.”

The McGowan government has rejected any notion of proceeding with Roe 8 to the point where it reclassified the wetlands the road was meant to cut through, rendering them untouchable.

GST win continues

This year is the first that the GST 70 cent floor will come into effect.

The changes to the GST redistribution bring WA’s share up to 70 cents in the dollar, which will require the Commonwealth to inject billions extra to the pool to ensure no state is worse off.

WA infrastructure funding included in the federal budget

New funding

• Thomas Road – Dual Carriageway – South Western Highway to Tonkin Highway and interchange at Tonkin Highway: $145 million
• Regional Road Safety Upgrades: $140 million
• Morrison Road Level Crossing Removal: $100 million
• Tonkin Highway – North Ellenbrook Interchange: $50 million
• Moorine Rock to Mt Holland Road Upgrades: $48 million 
• Newman to Katherine Corridor Upgrade – Great Northern Highway Upgrade – Newman to Port Hedland Overtaking Lanes: $40 million

Extra funding for existing projects

• Bunbury Outer Ring Road (Stages 2 and 3): $320 million
• Tonkin Highway Stage 3 Extension: $200 million for the 
• Pinjarra Heavy Haulage Deviation – Stages 1 and 2: $178 million 
• Thornlie-Cockburn Link: $135 million
• High Capacity Signalling: $116 million
• Yanchep Rail Extension: $90 million

The changes to the GST were made in 2018 to appease an increasingly irate WA public over its low share of the GST pool.

It has become an increasing headache for the Commonwealth as other state and territory treasurers argue the system has gone too far the other way and flushes WA with cash, despite its massive iron ore royalty revenues.

Clive Palmer’s claim

This year’s budget also reveals the Commonwealth has been brought into a new claim by Clive Palmer over his company Minerology’s stalled Balmoral South iron ore project, which he tried to sue the state of WA for more than $30 billion in 2020.

Budget papers reveal the Commonwealth has received requests for consultation in relation to the dispute and warned that Australia could be liable for compensation to Mr Palmer if unsuccessful in the dispute.

One of Mr Palmer’s companies is registered in Singapore and the dispute is a form of international arbitration allowed through the Singapore-Australia Free Trade Agreement.

Other WA nuggets

The budget papers also reveal $800,000 for a business case for irrigation improvements in WA’s South West as well as funding for community legal services.

This includes $1.9 million to extend funding for custody notification services in WA and $2 million to expand the Aboriginal Legal Service’s youth engagement program.

What we know already

There were no major surprises for WA in this year’s budget because, over the past fortnight, Mr Morrison and his cabinet have been wringing as much political capital as possible from major budget announcements.

The biggest announcement was made on Mr Morrison’s first visit to WA in a year when he announced a budget commitment of $4.3 billion to establish a dry dock at Henderson, south of Perth.

Construction was expected to begin in 2023 to 2024 with completion by 2028.

In that same week, Mr Morrison announced a top-up to the Perth City Deal to the tune of $75 million.

The money would be spent to cover cost blowouts of Edith Cowan University’s CBD campus and the Swan River Pedestrian bridge.

On Monday, the Commonwealth announced $2.1 billion more funding for the state’s infrastructure pipeline and $375 million for a new cancer treatment facility to be built in Nedlands in partnership with the WA government.

Mr Morrison also announced $36.2 million over four years to fund university departments of rural health in the South West and Goldfields regions and $119.6 million for a battery precursor material hub in Kalgoorlie and another $49 million for vanadium processing.

Jacqueline Maley cuts through the noise of the federal election campaign with news, views and expert analysis. Sign up to our Australia Votes 2022 newsletter here.

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