WA Budget reflects strong state economy – but are we ready for a rainy day?

The Cook Government has delivered a $3.5 billion budget surplus, buoyed by elevated mining royalties and heightened receipts from GST, stamp duty revenue and payroll tax.

The Government forecasts ongoing fiscal strength over the forward estimates, with surpluses of $2.4 billion in 2026-27, $1.8 billion in 2027-28 and $3.5 billion expected in 2028-29.

Despite these strong outturns, public sector net debt is expected to continue rising over the forward estimates from $34.5 billion for 2025-26 to $44 billion in 2029-30, reflecting sustained high levels of spending. Expenses growth of 6.9 per cent is expected in 2026-27, with spending forecast to moderate the following year.

The Government appears conscious of downside risks to mining activity and royalty revenue in coming years, which should be reflected in greater fiscal discipline and future proofing. Despite sizeable swings in commodity prices over the last decade, though, we are still not seeing a proactive strategy to translate our current budget strength into long-term economic resilience.

The Budget expects that iron ore prices will fall to US$72/tonne from the current rate of US$104.7 in 2025-26. These assumptions are likely to be on the conservative side, but they do project that this revenue stream is likely to diminish over time.

The recent strength in iron ore prices has provided a near-term boost to royalties, but the longer-term outlook for Chinese steel demand remains the central uncertainty for WA’s revenue base. Gold and lithium prices also provided a revenue bump this year.

However, the Government must continue to do more to diversify the state economy and set WA up for longer-term sustainability. Supported projects will need to have clear objectives and evaluation mechanisms with transparent reporting on progress.

Infrastructure

The Cook Government continues to add to an already ambitious infrastructure program, with $44.3 billion in infrastructure spending over the four years to 2029-30, including $13.2 billion in 2026-27. The largest expenditures remain concentrated in energy, water and transport infrastructure, while health-related spending also received a significant uplift in the budget.

It is unclear whether the delivery of this infrastructure pipeline is achievable in light of persistent capacity constraints in the construction industry. There need to be further efforts to encourage skilled migrants to WA to fill gaps in the local workforce while also continuing investment in local training. 

The timing of large infrastructure projects should be reviewed to ensure they are not crowding out investment in the private sector or other priority projects such as housing.

Recent announcements that the WA and Commonwealth Governments will work closely together to further simplify planning and approvals processes are welcome developments that will help support investment and delivery of key projects.

Water

Water infrastructure received significant focus in this year’s budget, with a record $2.7 billion committed for 2026-27 as part of a $6.4 billion four-year capital works program across Water Corporation, Aqwest and Busselton Water. The most significant spend is $606 million for the Dampier Seawater Desalination Plant in the Pilbara.

Cost-of-living and inflation

With inflation increasing over the past year and future inflation risks linked to fuel supply and prices, this Budget continues the recent trend of providing more cost-of-living support. Perth’s inflation rate for the year to the March quarter 2026 was 4.6 per cent – in line with national CPI. The Budget projects inflation of 3.75 per cent in 2026-27, easing across the forward estimates.

New cost-of-living commitments in this Budget include a fuel credit payment of $100 to every Western Australian driver’s licence holder (a commitment of $198 million), a third round of the WA student assistance payment, totalling $89.5 million, the permanent extension of free Sunday public transport and free student travel to and from school, with $70.1 million committed, and additional targeted supports including energy assistance payments, vehicle licence fee discounts, and rebates on local government rates and water charges.

Cost-of-living pressures are being acutely felt among lower income households and renters. Addressing housing shortages remains the most effective way to provide cost-of-living relief. The housing announcements are welcome; however, it will still be years before delivery.

Housing

Housing pressures in WA remain acute, with growth in rental and dwelling prices significantly outpacing the national average. High house prices continue to support Government revenue, with $4.3 billion in stamp duty payments expected this year.

There is sizeable spend on housing of $4.7 billion, which includes Commonwealth Government funding to deliver 34,000 new dwellings, with one third set aside exclusively for first home buyers.

Low-income renters need immediate relief and the extension of the rent relief scheme is a positive move on this front. The Cook Government should also look for other options to assist renters in the private market, such as the Commonwealth’s National Rental Affordability Scheme, which ends in June.

First home buyers are a key focus for the Government. Stamp duty exemptions for these buyers have been extended up to $600,000 (from $500,000), and concessions up to $800,000. The impact of these policies is expected to be minimal, however, with median house prices in Perth now over $1 million. On budget day, only 6 per cent of homes for sale in Greater Perth on realestate.com.au were listed under $600,000.

Approximately $1.5 billion is allocated to deliver social and affordable housing, contributing an additional 1,426 new dwellings through the Housing Australia Future Fund. But with over 20,000 households on the waitlist for social housing in the state, there is still a lot of work to be done to ease pressure in the housing system.

The Budget also includes $48 million to establish and expand two Housing and Infrastructure Advanced Manufacturing Facilities to support modern methods of construction in WA.

A critical issue holding back progress on new home builds in WA is a stretched construction workforce. WA has the longest construction times in the country by some margin, with workforce shortages a key driver. In response, the Government has set aside $13.1 million to help attract and recruit skilled construction workers to build homes and critical infrastructure in the state.

Longer-term, the state needs to further address weak construction productivity by reducing barriers to firms growing and becoming more efficient. This means reducing the high levels of regulation in the home construction sector and addressing complex planning and zoning regulations at the local government level.

Broader stamp duty reform, which would improve the functioning of the housing market over the longer term, continues to be off the table. This is disappointing, as this is an area where the Government could use the strength of its balance sheet to make a meaningful difference in people’s ability to access affordable housing.

Energy transition

The Budget establishes a $1.4 billion Clean Energy Fund supporting Clean Energy Link North, due to come online late 2027, and Clean Energy Link East, a priority project under the State Development Act 2025, due to come online at the end of 2029.

Meanwhile, rebates and no-interest loans have been provided to help households make the transition to cleaner energy by investing in batteries.

WA’s progress on the path to net zero remains slow. Continued investment will be required to speed it up.

Regional WA and the Seven Cities

This Budget formalises a Seven Cities vision, identifying Bunbury, Kalgoorlie, Port Hedland, Karratha, Broome, Geraldton and Albany as critical to the state’s economic and renewable energy ambitions. Confirmed initiatives include $89.1 million for upgrades at Bunbury’s Casuarina Boat Harbour and $40.7 million for 111 new housing lots in the Broome North residential estate.

Regional housing is a particular focus, with $692 million in total regional housing investment, including $419 million for Government Regional Officer Housing (GROH) and government worker accommodation. More than 500 homes will be delivered for regional frontline workers over five years, partially funded through the Resources Community Investment Initiative.

Global economic uncertainty

The Budget comes at a time of global economic uncertainty driven by the unresolved conflict in the Middle East and ongoing trade tensions. The economic impacts of the fuel shock are already being felt with the latest CPI data revealing a 33 per cent increase in fuel prices, the strongest monthly increase since the series began.

WA’s industry composition leaves the state highly exposed to fuel security risks. The state remains heavily dependent on imported fuels, with no local refining capacity since the closure of BP Kwinana.

Notwithstanding a positive outcome for this year’s bottom line, heightened volatility and uncertainty globally are likely to moderate global economic growth and dampen the outlook for WA.

To hear more on today’s State Budget, join CEDA for the WA State Budget Address on Thursday 28 May, with the Honourable Rita Saffioti, Deputy Premier; Treasurer; Minister for Transport; Sport and Recreation. Limited tickets still available here.