A proposed resource royalty hike in Western Australia has sparked a spat between state and commonwealth governments, with Treasurer Wayne Swan threatening to withhold over $2 billion in Federal infrastructure investment.


The Federal Government, which has pledged to refund all state-based royalty charges, faces a $1.9 billion blowout in the country’s budget over four years if WA goes ahead with its plans to increase its royalty charges.


“The Barnett government’s decision means it will be much harder for the federal government to finance additional infrastructure projects in Western Australia funded by the mineral tax”


WA is also liable to have its GST funding significantly reduced if it goes ahead with the plan, with the federal government saying that increased earning capacities reflected in the royalty hike would entitle the state to less GST based federal funding.


The Association of Mining and Exploration Companies has responded angrily to the proposed royalties hike, claiming that none of their representatives were consulted before the Government announced its intentions.


The decision, announced in the State Budget, is set to increase the state’s royalty income to $4 billion.