Ben Wyatt promises that the iron ore price rally won’t spark rash spending

Treasurer Ben Wyatt is insisting the State Government will be “prudent” in its spending in the face of a possible billion-dollar iron ore windfall, with international prices soaring to near boom-time highs.

The spot price for iron ore hit $US108 a tonne this week — its highest point since April 2014 — on news of falling stockpiles in China and continuing supply problems in Brazil.

Economists said the WA Government had likely banked an extra $300 million in revenue this month than had been budgeted, with the State on track to get a billion-dollar windfall if conditions continue over coming months.

Mr Wyatt said while prices were good, he was not about to start spending “like it was going to last for ever”.

“The McGowan Government will continue with a prudent, conservative approach to managing the State’s finances,” Mr Wyatt said. “This is an approach which is working, has returned the State to a surplus two years earlier than forecast and has got the State back on track.”

The State Government is extremely sensitive to claims it is back in the money for fear it could open the door to a rash of pay claims from unions.

The WA Budget, released on May 9, estimated the average iron ore price for 2018-19 was $US76.50 and it assumed that price would fall to $US73.50 on July 1 and remain there for 2019-20. But commodities analysts believe the elevated iron ore prices of recent weeks may continue for some months, which would be a boon for the WA Budget.

ANZ economist Cherelle Murphy says the WA Government has banked an extra $200 million to $300 million in revenue since the Budget.

The Budget was in surplus for the first time in five years, thanks largely to ore prices and the Federal Government’s GST deal. Ore prices have surged since the January dam collapse at Brazil’s Vale mine.