WA’s Gold Royalties Response Group says the gold sector will be burdened with the majority of a $A560 million hike in revenue over three years from 2015-16, representing an increase of about 85%.

Meanwhile, the Chamber of Minerals and Energy of WA warned that an increased reliance on mining royalty income in government revenue highlighted the risks of waning exploration investment.

In the text of a speech presenting the budget, state Treasurer Mike Nahan confirmed that WA now relied on mining royalties for 22% of its total government revenue.

This has been forecast to increase to 25% by 2017-18.

“Royalties are a growing but volatile source of revenue, with small fluctuations in the exchange rate and iron ore price resulting in large and often unexpected movements in revenue,” Nahan said.

“However, with GST revenue expected to account for just 8% of total general government revenue in 2014-15, the state government currently has little choice but to rely on volatile mining royalties and inefficient state taxes.”

GRRG spokesman and Doray Minerals managing director Allan Kelly said there was no predetermined outcome from the royalty review process currently underway, despite repeated assurances by the government.

“Previous government statements have made it clear this additional money is expected to come predominantly from the gold sector,” Kelly said.

“This is both disappointing and concerning.

“Either government has given the gold sector false assurances or the new budget is based on forecast revenue that won’t be realised.”

Speaking at the Tropicana gold mine opening last month, WA Mines Minister Bill Marmion said there would be no gold royalty rise in the 2014-15 budget.

“In terms of the current royalty review, as far as I’m concerned as the minister for mines and petroleum, there’s no impact on this budget,” Marmion said at the event.

Kelly emphasised that the gold sector made a substantial contribution to WA’s regional economies through various taxation mechanisms and directly employed almost 22,500 people in 2012-13, making it the second largest employer in the state’s mineral sector.

“Gold producers’ margins have been seriously eroded by rising production costs and an 11% decrease in the gold price in the past year,” he said.

“Any increase in the gold royalty rate in Western Australia will be an extra impost the industry just couldn’t bear.”

Nahan outlined the budget to include a package of revenue and savings measures totalling $2 billion over the next four years, expected to underpin a surplus of $175 million in 2014-15.

A general government operating surplus of $183 million is expected for 2013-14, down from the $437 million surplus forecast in the mid-year review.

Budget statements released by the government yesterday sketched a record $280 million of infrastructure investment in the Pilbara region, including $147.3 million to develop the region’s cities, $22 million for worker incentives and $14.1 million for worker housing.

However, CME said while it applauded the government’s resources exploration incentive scheme, the falling level of expenditure on exploration presented risks to the budget’s forward estimates.

“Western Australia’s reliance on income from the resources sector has never been greater, with an expected contribution of $7.3 billion in 2014-15,” CME chief executive Reg Howard-Smith said.

“To put that in context, the resources sector is now funding this year’s combined total budgets for education and law and order.

“Or, put another way, it is funding the entire capital cost of the new Fiona Stanley Hospital, the Perth Children’s Hospital and new health facilities in Midland, Joondalup, Albany, Busselton, Carnarvon, Esperance, Exmouth, Kalgoorlie and Karratha.

“The budget papers clearly show that exports from the resources sector will continue to be the key driver of economic growth over the forward estimates period.”