ANALYSIS: Few places in the world have benefited more from their natural resource endowment. But prosperity also creates exposure.
WESTERN Australia has won the resources lottery.
The sector contributes almost $200 billion to the state economy each year, accounts for nearly half of all economic activity and generates billions of dollars in public revenue.
Few places in the world have benefited more from their natural resource endowment.
But prosperity also creates exposure.
Last year, mining and petroleum royalties delivered almost $10 billion to the WA government: around one-fifth of total state revenue.
Iron ore generated more than 80 per cent of those royalties, while four in every five export dollars earned by WA came from trade with China.
That concentration has served the state extraordinarily well but also leaves it exposed to forces increasingly beyond its control.
The global resources sector is entering a period of profound change.
Decarbonisation, technological disruption, geopolitical fragmentation and growing competition for investment are reshaping commodity markets and industrial strategies worldwide.
Governments are intervening to secure critical mineral supply chains, attract investment into processing and manufacturing, and position themselves for the industries that will drive future growth.
The question for WA is not whether resources will remain important. They will.
The question is whether we continue to capture enough value from them.
Our modelling shows future growth increasingly comes from transition minerals, processing and higher-value products, rather than traditional commodity exports.
The future is inherently uncertain, of course, but under plausible future scenarios, industries linked to critical minerals and value-added processing could exceed $100 billion annually by 2050; up from around $20 billion today.
At the same time, fossil fuel exports could fall from around $39 billion to approximately $11 billion.
In other words, the resources sector remains central to WA’s prosperity, but the sources of that prosperity are changing.
This is not simply an industry story. It is a fiscal story.
As the resources sector evolves, so too will the revenue streams that governments rely on.
Royalties, company tax and payroll tax will increasingly be shaped by the types of commodities we produce, how much processing occurs in Australia, and where value is created along the supply chain.
Higher-value industries can generate more jobs, higher salaries and stronger tax bases, but they do not automatically replace declining royalty streams.
The fiscal model that has served WA so well over recent decades cannot be assumed to look the same in the decades ahead.
One of the clearest findings from our research is that policy settings matter.
Alternative royalty structures, resource taxation arrangements and approaches to public participation in major projects can shift billions of dollars in public revenue over time.
New projects such as Browse could materially affect the fiscal outlook of both WA and the Commonwealth for decades.
These are ultimately questions about intergenerational prosperity.
Resources wealth is finite. Once extracted, it is gone forever. The challenge is ensuring today’s resources boom creates lasting economic and fiscal value long after the resources themselves are exhausted.
WA has the minerals, expertise and competitive advantages needed to prosper in the next phase of global resources development.
The state possesses globally significant reserves of critical minerals, world-class mining capability, abundant renewable energy resources and a unique opportunity to move further up the value chain.
But future success will depend less on how much we dig up and ship overseas, and more on how effectively we convert resources wealth into new industries, greater added value, stronger public finances and enduring prosperity.
The next chapter of WA’s resources story will be defined not simply by the resources we extract, but by how effectively we transform resources wealth into enduring public value.
• Professor Alan Duncan is director of the Bankwest Curtin Economics Centre at Curtin University
