A resurgent iron ore price is set to deliver a massive pre-Christmas windfall to the Western Australian government, with the state's budget bottom line expected to improve by as much as $2 billion.
Conservative Forecasts Exceeded
Treasurer Rita Saffioti's post-election budget, handed down earlier this year, was built on a conservative iron ore price estimate of $US72 per tonne. This cautious approach reflected widespread concerns about the potential impact of former US President Donald Trump's threatened tariffs and signs of slowing economic growth in China.
However, the market has dramatically outperformed those expectations. Since the budget was delivered, the price of the state's key commodity has averaged $US103.17 per tonne. This sustained strength means predicted royalty revenue for the 2024-26 period could leap from the budgeted $6.6 billion to as high as $9 billion, provided the current conditions hold.
Where Will the Extra Money Go?
Premier Roger Cook has already vowed that any additional revenue from this royalty boom will be directed towards the state's pressing priorities in health and housing. Treasurer Saffioti confirmed that further investments are imminent.
"We're investing WA's royalties into priorities like health, with our new $1.5 billion Building Hospitals Fund," Ms Saffioti stated. "We've also invested a record $5.8 billion in housing and homelessness since 2021."
She indicated that the government's strong financial position allows for continued strategic investment, with more details to be unveiled in the Mid-Year Review budget process in the coming weeks.
Analysts Remain Cautiously Optimistic
While most analysts still predict a price correction next year, some institutions have revised their forecasts upwards. Notably, Goldman Sachs has increased its 2026 iron ore forecast from $US88 to $US93 per tonne, pointing to "steady" steel production in China as a key factor.
The budget boost won't be limited to iron ore. The upcoming mid-year review in late December will also show significantly higher revenue from gold, with its price having surged past the $US4000 per ounce mark.
Aaron Morey, Chief Executive of the Chamber of Minerals and Energy WA, highlighted the benefits of the government's conservative forecasting. "Billions of dollars in royalty upgrades in the days before Christmas has become an annual Western Australian tradition," he said. He emphasised that the state's standard of living is built on this revenue, which funds essential services and infrastructure.
When questioned about potential changes to royalty rates, Treasurer Saffioti did not provide a guarantee but attributed the positive results to "strong" budget management. She noted the government is on track for its eighth consecutive surplus, with debt levels substantially lower than previous projections.
Despite this positive news, the state's total public sector net debt saw an increase of $1.4 billion in the quarter ending 30 September, reaching $31.5 billion.
