Premier Colin Barnett said today he was "gobsmacked" by the federal government's threats to Western Australia, as the row with Canberra over mineral royalties heats up.
Premier Colin Barnett said today he was "gobsmacked" by the federal government's threats to Western Australia, as the row with Canberra over mineral royalties heats up.
Mr Barnett and federal resources minister Martin Ferguson both spoke on the issue, after the two men came together at Shell's announcement of its Prelude gas project.
"I haven't had many experiences in my 20 years of politics where senior ministers in a federal government have actually threatened the people of a state, I'm quite gobsmacked by some of the comments that have been made," Mr Barnett told journalists.
The issue was triggered by Thursday's budget announcement that WA would increase royalty rates on iron ore 'fines' from 5.625 per cent to 7.5 per cent by 2014.
The increase will bring in $1.9 billion in extra revenue to WA by 2015, creating a black hole in the federal government's budget because of its commitment to provide a credit to miners for any increase in royalties.
The Premier insisted WA was simply exercising its long-standing right to determine mineral royalties, and the impact on the federal government's planned minerals resource rent tax (MRRT) was irrelevant to the state's decision.
"Wayne Swan has made some extraordinary allegations that I'm playing political games, I can tell you....the implications for the MRRT were not a factor considered at any stage by the state government, it is not relevant to us."
"Everyone in Australia knows what the Commonwealth is doing, it is simply trying to grab money out of Western Australia.
"Under their proposed MRRT, 65 per cent of the revenue comes from this state."
Mr Barnett said the royalties increase was widely expected by the industry.
"I've spoken to the heads of BHP and Rio Tinto, they've shown absolutely no surprise, they knew we were going to do this.
He also said the state's decision provided certainty.
"There is one thing certain about removing the concession on (iron ore) fines ... we will collect $1.9 billion over the next four years, there is absolutely nothing certain about what we will collect from the GST.
"A bird in the hand or one in the bush, which one are you going to take?"
In contrast, Mr Ferguson accused WA of double dipping, because it wanted to raise its own royalties income, and get infrastructure grants from Canberra.
"You can't double dip to the disadvantage of the rest of the Commonwealth, because that's what this debate is really all about."
Mr Ferguson said infrastructure grants to each state were proportionate to the MRRT payments generated in each state.
The WA government's move will cut Commonwealth revenue available for infrastructure spending in WA.
"You can't now expect the Commonwealth to go to other states ... and say we are going to dud you and reduce your expected grants for infrastructure, because the WA government, by its actions...., has reduced the Commonwealth revenue."
Mr Ferguson claimed WA was "seeking to undermine the capacity to do things in other resource states".
Meanwhile, the federal opposition says the states have every right to raise taxes to pay for new capital works, as the federal government threatens Western Australia with funding cuts.
Prime Minister Julia Gillard says WA will get less money for major projects and in GST payments following the Barnett government's budget move to hike iron ore royalties.
The WA coalition government on Thursday announced it would increase the royalty rate for iron ore fines to 6.5 per cent as of July 1, 2012, then to 7.5 per cent the following year.
The increase is expected to net the WA government $2 billion over three years.
Under the minerals resources rent tax deal, the federal government must credit mining companies with mineral royalties they pay the states, meaning the Gillard government stands to lose $2 billion under the new WA arrangement.
Ms Gillard told reporters in Adelaide the decision - which ran contrary to the coalition's campaign against higher mining taxes - would end up costing WA in terms of GST revenue and infrastructure.
Ms Gillard said Premier Barnett had scored an "own goal".
"He knows how GST works and he knows that under the current system that this means the GST money will be moved away from Western Australia," she said, referring to determinations by the independent Commonwealth Grants Commission.
"They will also lose infrastructure funds that would have flowed from the minerals resources rent tax."
Opposition treasury spokesman Joe Hockey said he hoped other states followed suit.
"If other states need to increase their taxes to fund the infrastructure to cope with a transition in the economy then so be it," Mr Hockey told reporters in Mackay.
Mr Hockey said Canberra wasn't "qualified" to determine the needs of infrastructure in the states.
Opposition Leader Tony Abbott said WA's move would drive a $2 billion hole through the government's plans to return the budget to surplus.
But Ms Gillard said she remained committed to returning the federal budget to surplus by 2012/13.
"We will deliver that budget surplus," she said.
Treasurer Wayne Swan said he doubted WA's tax move would net an extra $2 billion.
"It's somewhat less than that, but I'm going to get the Treasury to do the work over the weekend," he told ABC Radio on Friday.
Victorian Premier Ted Baillieu says he hopes the WA decision leads to a fairer sharing of GST.
"If it is that the commonwealth are now going to get it - see that the GST distributions are unbalanced - that'd be potentially be a positive thing for Victoria," he said.
A GST review is due to report next year.