Premier accused of 'tantrum' over iron ore royalties

Mr Colin Barnett has announced plans to increase the royalty rate paid on a certain type of iron ore in a move expected to earn the State Government $2 billion dollars over three years.

The Commonwealth has warned that, if the plan goes ahead, it will be forced to cut WA's share of GST revenue.

WA Labor Senator, Chris Evans, has accused Mr Barnett of being hypocritical because he was a vocal opponent of the Federal Government's plans to impose a Minerals Resource Rent Tax.

"The current tantrums quite frankly do him no credit," Senator Evans said.

"This Federal Government is absolutely committed to supporting infrastructure in Western Australia but you cannot have it both ways, you can't double dip."

The increase in state royalties will blow a $2 billion hole in the Federal budget and the Commonwealth says WA's share of the GST pie will have to be cut as a result.

The Federal Member for Perth, Stephen Smith, says Mr Barnett was well aware of that when he made the decision to increase royalties.

"When a state premier does that, he does it with his eyes open and he knows that there are bound to be consequences," Mr Smith said.

"Now we need to work our way very carefully through those consequences, they're consequences caused by Colin Barnett."

WA's Deputy Premier, Kim Hames, says the Commonwealth should stay out of WA's business.

The increase is expected to net the WA Government $2billion over three years.

Under the minerals resources rent tax deal, the Federal Government must credit mining companies with mineral royalties they pay the states, meaning the Gillard Government stands to lose $2 billion under the new WA arrangement.

Ms Gillard said in Adelaide the decision which ran contrary to the Coalition's campaign against higher mining taxes would end up costing WA in terms of GST revenue and infrastructure. She said Premier Colin Barnett had scored an ''own goal''.

''He knows how GST works and he knows that under the current system, that this means the GST money will be moved away from Western Australia,'' she said, referring to determinations by the independent Commonwealth Grants Commission.

''They will also lose infrastructure funds that would have flowed from the minerals resources rent tax.''

Opposition treasury spokesman Joe Hockey said he hoped other states followed suit. ''If other states need to increase their taxes to fund the infrastructure to cope with a transition in the economy, then so be it,'' Mr Hockey said in Mackay.

Opposition Leader Tony Abbott said WA's move would drive a $2billion hole through the Government's plans to return the budget to surplus.

But Ms Gillard said she remained committed to returning the federal budget to surplus by 2012-13.

Treasurer Wayne Swan said he doubted WA's tax move would net an extra $2 billion.

''It's somewhat less than that, but I'm going to get the Treasury to do the work over the weekend,'' he said yesterday.