Revenue write downs of more than $10 billion across the forward estimates have taken a sledgehammer to the state's budget position.
Revenue writedowns of more than $10 billion across the forward estimates have taken a sledgehammer to the state's budget position, with the government turning to increased land tax to make up part of the difference.
Due in part to the drop in iron ore prices, money flowing into the coffers this financial year is forecast to be 13 per cent below the level anticipated in last year's budget, wiping more than $3 billion off the budget bottom line.
Treasurer Mike Nahan said it was the most substantial reduction on record.
“That is proportionally a bigger hit to our budget than the GFC was to the Commonwealth budget,” he said.
To compensate, the government has turned to land tax.
The charge on unimproved land, which is viewed by economists as one of the least damaging to long-term economic performance, will go up dramatically.
A new scale of thresholds will mean $184 million of extra revenue in 2015-16 and $826 million across the forward years, although the Treasurer said the rates were competitive with other states.
Royalties and other taxes
As expected, the damage dealt by collapsing iron ore and oil prices was enormous, with royalties to be $3 billion in 2015-16, almost 40 per cent below their peak in 2013-14 of $5.5 billion.
This on the back of the government forecasting an iron ore price of $US47.50 per tonne for the next year, to recover to around $60/t in the out years.
In a nod to the mistake in last year's price projections, the government has updated its methodology to rely more on the Singapore futures market, which it said was now much more liquid than in previous years.
Slow growth in private sector wages will also lead to slow growth in payroll tax receipts, while GST revenue will decline to just $1.9 billion, just 30 per cent of what Western Australia would receive under a per capita distribution.
As the impact of lower commodity prices washes through, the distribution is expected to rise to $5.1 billion by 2018-19, still well below the what would be expected if a per capita distribution was used.
Nonetheless, it will be enough to propel the budget to a $2.2 billion surplus in 2018-19.
One piece of positive data was the government’s share of taxation in the economy.
The government has touted its 3.6 per cent taxation share of gross state product as substantially better than the 4.6 per cent national average.