West Australian Premier Colin Barnett gets even with Wayne Swan by announcing that the Gillard administration had previous knowledge over his plans to raise an extra $2 billion in last week's budget. This after the latter had attacked the former regarding his increases in minor royalty.

The Barnett government was confronted by the federal government with the information that a $300 million hole is in the state budget and as a consequence, cuts on the federal plans for roads, rail and ports are expected in order to expand resources.

federal ministers said infrastructure spending planned for Western Australia will not go ahead and the West's share of GST revenue will fall further if Barnett will not back off with his proposed $2bn state mining royalty hike.

However, the Premier and West Australian Liberals denied the federal Treasurer's claims of non-information of the royalty rise. The Liberals accounted a letter about the scheduled increases by July 2012 was sent out a year ago to the previous Treasury Secretary Ken.

West Australian government’s announcement of increase in royalties on iron ore fines had started the political fight over federal-state funding and mining taxes has escalated since the West Australian government announced it would raise royalties on iron ore fines from the present rate of 5.625 per cent to 7.5 per cent come 2014. Mining companies will be refunded for state mining royalties under the federal government's proposed mineral resources rent tax.

Ferguson expressed Gillard government’s commitment to “the mining industry to credit royalties" but said the Commonwealth Grants Commission would be given the strong message that the mining royalties were lifting Western Australia's income.

The Resources Minister warned that the state government should take over the planned federal spending on infrastructure for mining. "I encourage the Western Australian government to do what the commonwealth was going to do out of the MRRT - substantially increase infrastructure spending in Western Australia," said Ferguson.

Swan criticized the Barnett government's royalty rise and said it had been done without consultation. "And Barnett, I think, is simply playing a political game," he added.

Barnett explained Swan had little understanding of the iron ore industry and the government had been informed about the plans previously.
"The federal government's reaction was way over the top. It displayed a lack of understanding about the royalties system and a lack of understanding of the iron ore industry," said the Premier.

According to Federal opposition assistant Treasury spokesman Mathias Cormann, Swan had been "economical with the truth" because "he knew back in 2010 about WA's scheduled increases in iron ore royalty rates".

"Wayne Swan is making a complete mess of this and he is being very economical with the truth in the process," Cormann said.