Hon Wendy Duncan questions the Minister about using increased iron ore royalties to incentivise public sector employees in regional areas through allowances and housing. The Minister acknowledges the revenue increase but prioritises infrastructure investment due to its short-term nature and GST redistribution.

AnsweredQoN 694Legislative Council
Asked
26 June 2008
Portfolio
Employment Protection

QuestionView source ↗

IRON ORE ROYALTIES — FUNDING FOR COUNTRY AREAS
Given that the government is expected to reap an additional $1 billion in iron ore royalties next financial year due to the increased sale price that was recently secured by Rio Tinto and BHP Billiton, I ask — (1) Will the minister use this royalty windfall to provide incentives for essential public sector employees to work in regional areas? (2) In particular, will the minister agree to demands from country-based public sector workers that they be paid district allowances that accurately reflect the higher cost of living in regional areas? (3) Will the minister now increase, improve and subsidise housing for essential public sector workers in regional Western Australia? Hon JON FORD

AnswerView source ↗

I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
(1) Will the minister use this royalty windfall to provide incentives for essential public sector employees to work in regional areas? (2) In particular, will the minister agree to demands from country-based public sector workers that they be paid district allowances that accurately reflect the higher cost of living in regional areas? (3) Will the minister now increase, improve and subsidise housing for essential public sector workers in regional Western Australia? Hon JON FORD replied: I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
(2) In particular, will the minister agree to demands from country-based public sector workers that they be paid district allowances that accurately reflect the higher cost of living in regional areas? (3) Will the minister now increase, improve and subsidise housing for essential public sector workers in regional Western Australia? Hon JON FORD replied: I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
(3) Will the minister now increase, improve and subsidise housing for essential public sector workers in regional Western Australia? Hon JON FORD replied: I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
Hon JON FORD replied: I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
I thank Hon Wendy Duncan for some notice of the question. (1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.
(1)-(3) Assuming that the rest of the iron ore industry achieves the same price increases as Rio Tinto and there is no change to the out year price profile—that is, flat prices in 2009-10 and 2010-11, followed by a 25 per cent decline in 2011-12—the 85 per cent increase in prices will generate an additional $684 million in mining revenue over the forward estimates period—that is, 2007-08 to 2011-12—not $1 billion in the next financial year. This amount is net of lower goods and services tax grants in the out years as a result of the Commonwealth Grants Commission process; that is, $834 million in gross royalty revenue, less $150 million in lower GST revenue. Notwithstanding that, this is a short to medium-term benefit for the state. Iron ore prices will eventually plateau and then decline as more mines come onto the market, so this is not a sustained long-term gain. Also, Western Australia will ultimately lose 75 per cent of this additional royalty revenue as a result of the Grants Commission redistributing this revenue to other states through a reduction in our share of the GST revenue over a five to seven-year period. This additional royalty revenue is not a sustained benefit. Therefore, the most appropriate use of this money is to put it into the infrastructure program, either to reduce debt involved in funding that program, or to maintain the debt level and increase the amount of infrastructure that we build. Short-term gains do not allow for long-term funding obligations. A range of incentives are currently available to public sector employees in regional areas. These incentives include additional leave, an air conditioning subsidy, a district allowance, and attraction and retention benefits. The government has made an offer to increase district allowances. That offer is currently the subject of negotiations with public sector unions. Housing for eligible public sector workers in regional Western Australia is the responsibility of the Minister for Housing and Works. I am advised by the Minister for Housing and Works’ office that while Government Regional Officers’ Housing works out the tenant rent setting framework, it is up to individual agencies to decide what rent they charge their tenants.

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