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The Cook Government has delivered another budget surplus buoyed by strong economic conditions across the state that are providing high levels of mining royalties, stamp duty revenue and payroll tax.
The 2025-26 WA Budget sets out an ambitious infrastructure agenda that will be difficult to deliver given workforce shortages and capacity constraints. It risks crowding out other necessary projects, notably housing, and private sector investment.
Western Australia’s budgetary position continues to be the envy of other states and territories, recording a surplus of $2.5 billion for 2024-25, with a further $2.4 billion surplus forecast for 2025-26. WA is in a unique position, with surpluses expected until at least 2029.
Despite this bounty, public sector debt is expected to increase over the forward estimates from $33.6 billion this year to $42.5 billion by 2029, reflecting the high levels of infrastructure spending. Expenses growth also remains relatively high, at 4.3 per cent this year, although growth is projected to be more moderate over the forward estimates.
It is imperative that a sharp eye remains on expenses growth, which may become an issue if and when the mining sector softens and revenue falls. The Budget shows that iron ore prices are expected to fall to US$72 per tonne by 2028. These assumptions are likely to be on the conservative side, but they show this revenue stream is likely to diminish over time. The Budget also forecasts declines in stamp duty revenue due to an expected moderation in housing demand.
The Government must do more to diversify the state economy and set WA up for longer-term success. An additional $500 million boost to the strategic industries fund, focused on common-user infrastructure, is a step in the right direction. Supported projects will need to have clear objectives and outcomes.
There is a need for further measures to simplify planning and approvals processes across all levels of governments to encourage investment in diverse industries and develop an attractive business environment in the state.
Infrastructure
The Cook Government continues to add to an already ambitious infrastructure program, with $38 billion of infrastructure spending over the four years to 2028-29, including $12.1 billion in 2025-26. The largest spends are concentrated in energy and water infrastructure (35 per cent of the total infrastructure spending) and transport (38 per cent).
It is unclear whether the delivery of this infrastructure pipeline is achievable with the current capacity constraints in the construction industry. There needs to be increased efforts to encourage skilled migrants to WA to fill gaps in the local workforce while also investing in local training.
The expansion of incentives to get skilled Australian and New Zealand construction trades to WA is positive, but it is likely that further construction-worker migration will be required to successfully deliver on the ambitious housing and infrastructure pipeline.
The timing of infrastructure projects should be reviewed to ensure they are not crowding out investment in the private sector or other priority projects such as housing.
Cost-of-living and inflation
With inflation coming under control, this Budget sensibly includes fewer cost-of-living measures than recent Budgets. Perth’s inflation rate for the year to the March quarter was 2.8 per cent, the highest of all capital cities, but down from 3.4 per cent a year earlier. The Budget projects that inflation will remain at 2.75 per cent in 2025-26 and decline to 2.5 per cent throughout the forward estimates.
Although the rate of inflation has fallen, cost-of-living pressures remain, particularly for lower income households and renters. Addressing housing shortages would be the most effective way to provide cost-of-living relief.
Housing
Housing pressures in the WA community remain acute. The measures in this Budget are inadequate to address the size of the challenge.
A critical issue holding back progress on new home builds in WA, including social housing, is a lack of construction workforce. WA has the longest construction times in the country by some margin and workforce shortages are one of the key drivers of this.
We need to further address weak construction productivity by reducing barriers to firms growing and becoming more efficient, including reducing the high levels of regulation in the home construction sector and addressing complex planning and zoning regulations at local government level.
The announcement that Keystart will begin offering a loan for modular housing is positive and will hopefully encourage other lenders to do the same. This will help overcome one of the many barriers to more modern methods of construction, which will be crucial to making progress on housing shortages.
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 through the reinstatement of the National Rental Affordability Scheme.
The Budget includes some additional stamp duty relief for first-home buyers, but appetite for stamp duty reform, which would improve the functioning of the housing market over the longer-term, appears to be off the table. This should be reconsidered, particularly given the renewed national conversation around tax reform.
Energy transition
Support for the energy transition is provided through investment in infrastructure, as well as providing support to households to invest in home batteries. New energy transition commitments in this Budget include $584 million for Western Power to progress the Clean Energy Link and $14 million for Horizon Power to undertake network connection work for renewable energy.
Households are supported through the residential battery rebate and no-interest loans, which are expected to help 100,000 households reduce their energy requirements and bills through investment in batteries.
WA’s progress on the path to net zero remains slow. Continued investment will be required to speed it up.
Global economic uncertainty
The Budget highlights the significant levels of global economic uncertainty driven by the Trump Administration’s tariffs and trade policy, and notes the heightened levels of volatility in commodity markets.
WA is unlikely to be directly affected by US tariffs as it exports very little to the US – our primary export to the US is gold. The high levels of uncertainty have increased the gold price recently, providing a win for the WA Budget.
The most likely impact on WA is through reduced economic activity from our trading partners, notably China, if high levels of tariffs are introduced. A downturn in growth in China could flow through to reduced levels of demand for WA products, depending on the response of the Chinese government.
Even without any direct impacts, the extreme volatility and uncertainty globally is likely to moderate global economic growth and flow through to WA in some way. This supports the need for the WA Government to review the timing of infrastructure projects, keep an eye on expenditure growth and expand its efforts to improve diversification.