Updated September 07, 2017 20:54:14

The McGowan Government has abandoned a key election commitment just months after coming into office, slugging businesses with higher taxes in its first state budget despite promising not to.

Big businesses will see their payroll tax bills rise, while gold miners will also be slugged with higher royalties as part of Treasurer Ben Wyatt's attempt to bring WA's budget back to surplus by 2021.

Thousands of voluntary redundancies will be sought from the public service and an axe will be taken to the Royalties for Regions (RFR) program as part of substantial spending cuts, but it is not predicted to be enough to stop the state's debt rising to $43.8 billion by 2020.

WA's budget is predicted to be $2.3 billion in the red this financial year, with deficits above $1 billion predicted each year until a forecast return to surplus in 2020-21.

Who benefits, who loses out from the budget this year?

Premier Mark McGowan insisted revenue write-downs had left him with no choice but to break his pre-election pledge not to increase taxes, lifting payroll tax on companies paying employees more than $100 million per year.

"We are sorry about that, I am sorry; it hasn't been easy," he said.

Companies paying employees between $100 million and $1.5 billion will see their payroll tax rise to 6 per cent, while those above that level will pay 6.5 per cent — although the Government insisted that the rise would only last for five years.

The hike is expected to impact around 1,300 businesses operating in WA and raise $435 million over four years in the process.

Redundancies to save $300 million

Mr Wyatt announced 3,000 voluntary public sector redundancies to would deliver a saving of more than $300 million, but he insisted this would not impact frontline services.

Meanwhile, in a move sure to spark a backlash from the mining industry, gold producers will face much higher royalty charges in a move designed to raise nearly $400 million over four years.

Photo: Premier Mark McGowan apologised for breaking his tax promise but said it was necessary. (Supplied: Mogens Johansen/The West Australian)

The Government has also risked angering regional WA by shifting hundreds of millions of dollars in regular expenditure into the Royalties for Regions fund.

That means instead of funding additional regional projects as it was initially designed to, RFR will now be used to pay for ongoing costs related to health, water, sewerage and Labor's election commitments.

Households have been spared from further direct pain, after significant hikes to fees and charges were announced earlier this year.

Mr McGowan said the budget was an effort to get WA's finances back onto a sustainable footing after years of multibillion-dollar deficits, including a record $3 billion deficit last year.

"It's about striking the right balance between delivering on our election promises, creating new jobs and getting the state's finances back onto a sustainable direction," he said.

"I wanted to protect struggling families, and small and medium businesses."

Liberals attack 'budget of betrayal'

WA Opposition Leader Mike Nahan labelled it "a budget of betrayal".

"The McGowan Government promised not to increase taxes or add new taxes," Dr Nahan said. "They add a billion dollars worth of taxes.

"He also promised not to reduce frontline services and there are substantial reductions … he also promised to reduce debt. Debt goes up by 30 per cent."

A new gambling tax will be brought in, affecting internet-based bookmakers who have avoided the same levies as the TAB by basing themselves in other jurisdictions.

Photo: WA's budget is predicted to be $2.3 billion in the red this financial year. (ABC News: Eliza Laschon)

But the Government could face challenges getting that and other revenue-raising measures through Parliament, due to its lack of a majority in the Upper House.

Elsewhere, the budget does not including money for a train line to Ellenbrook, even though construction is due to start within two years.

The cost of Labor's Metronet public transport commitments has already blown out by nearly than $200 million due to higher costs for the Yanchep extension and Thornlie-to-Cockburn rail line.

And the ongoing troubles at the Perth Children's Hospital have cost the state an additional $18 million, while nearly $14 million will have to be spent fixing ICT systems at Fiona Stanley Hospital.

Miners, business lobby fear job cuts

Chamber of Minerals and Energy WA chief executive Nicole Roocke said the gold royalty hike was a "slap in the face".

Photo: CME chief executive Nicole Roocke has described the gold royalty hike as a "slap in the face". (ABC News: Eliza Laschon)

"The increase in royalties will be detrimental to the sector at the point in time when we're starting to see green shoots emerge," Ms Roocke said.

"There is the real potential that they'll be job cuts as a result."

Association of Mining and Exploration Companies acting CEO Graham Short also said the move would have "significant and social consequences".

"It's quite clearly a cash grab … [it is] short-sighted and to be honest quite baffling," he said.

Chamber of Commerce and Industry CEO Deidre Willmott said the payroll tax fallout would flow through the entire economy.

"There will be an impact on jobs … these increases are targeted at the largest employers so their employees will be affected," she said.

Topics: budget, government-and-politics, small-business, wa

First posted September 07, 2017 16:05:07