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WA parties clash on economy, budget

AAP logoAAP 22/12/2016 Greg Roberts

Many West Australians wonder how their state government's finances could be in such dire straits only a few years since the greatest mining boom in Australia's history ended.

That's a fact, no matter how much it might annoy Premier Colin Barnett and Treasurer Mike Nahan and how hard they spin the problem as being out of their control and the result of the incredibly low GST share the state receives.

So surely the overwhelmingly negative news delivered in Dr Nahan's mid-year budget review on Thursday - the final economic forecast before the March state election - must have damaged its re-election chances.

The already record high government debt of about $28 billion is forecast to rise to $39.7 billion in 2020.

This year's state deficit is forecast to be $3.39 billion - also a record high.

The joy that greeted Prime Minister Malcolm Turnbull's promise in August to fix those GST grants problems and therefore help fix WA's budget is gone.

The opposite has happened - the government this week revised GST share expectations down from a rise over four years to 76 cents for every dollar of GST its residents paid by 2020 to only 66 cents.

WA's economy is not in great shape - growth is weak and forecast to be only one per cent this year, down from 1.25 per cent forecast in May.

Tax revenue including payroll and property taxes actually fell and unemployment that is above the national figure is tipped to stubbornly stay between six and 6.5 per cent over the next four years.

The mid-year review was an early Christmas gift for the Labor opposition so close to the March poll, when Mr Barnett will try to win a third term.

Dr Nahan and Nationals leader Brendon Grylls went on the attack to aggressively sell a narrative that those financial and economic woes are not the Liberal National government's fault and that the state has thrived and been transformed over the past eight years.

Mr Grylls sounded angry at a press conference, saying WA's senior Liberals in Canberra led by deputy leader Julie Bishop were "weak and insipid" for not demanding the GST issue be fixed and stopping the state's revenue being given to other states.

But does a couple of years of poor GST returns explain the government's debt rising to nearly $40 billion?

It's true that if WA had received 100 cents in the dollar, as the other states did, instead of about 30 cents in 2015-16 that would have added $4.5 billion, greater than its $2.03 billion deficit.

But the highly flawed system does not discriminate and WA has done very well in the past and will again.

But we don't know when, and Dr Nahan and Mr Grylls say a "circuit breaker" is needed.

For the former it is the controversial proposed share market float of 51 per cent of poles and wires utility Western Power, that he says will raise $11 billion - resulting in $8 billion of debt gone and $3 billion for infrastructure.

Mr Grylls has his even more controversial mining tax plan to increase BHP Billiton and Rio Tinto's 25 cent a tonne rental fee in place since the 1960s to $5 and raise an additional $7.2 billion over the next four years, which the Liberals and Labor oppose.

Shadow treasurer Ben Wyatt said Dr Nahan and Mr Grylls were offering false "magical solutions" and there were no easy answers.

It would not address the spending problems or rising unemployment WA faced, he said.

Limiting wage growth was the key and making sure recurrent spending was at a more sustainable level, Mr Wyatt said.

Whether or not voters think that saying there is "no easy, simple quick solution" to the debt pile is good enough could be key to who wins the election, says political commentator Peter Kennedy.

"The question from the government to others (Labor) is: if you can't sell it (Western Power), what's your plan, how are you going to fund things?" he told AAP.

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