WA's budget is more than $1 billion worse off than at Christmas, with Treasury changing its forecasts and now saying it won't get back to surplus within three years as previously thought.
The midyear review seven weeks ago on December 22 had forecast a return to a surplus of $521 million in 2019/20 but Treasury is now predicting a $535 million deficit.
Net debt for 2019/20, which was projected in the mid-year review to reach $39.7 billion, is now expected to hit $41.1 billion as the government struggles to rein in costs as revenue falls in a slowing post-mining boom economy.
It is a blow to a Liberal National government that is behind Labor in the polls and in the middle of an election campaign.
WA's debt is too high and the highest of all Australian states as a share of the economy, Treasury said in its pre-election financial projections statement released on Thursday.
Net debt as a share of the economy was estimated to be 14.4 per cent compared to 4.3 per cent in NSW and 13 per cent in South Australia, and WA paid more to service its debt than the rest of the country because it's credit rating had fallen.
"Western Australia is facing a significant debt challenge, and the incoming government will need a clear and robust plan for addressing this challenge," Treasury said.
Labor leader Mark McGowan, who had committed to getting the budget back into surplus in a first term if elected, said the updated figures meant it would now be very difficult.
"If people are concerned about the debt and deficit they should throw out the government that did it - the Barnett Liberal government did it," he told reporters.
Treasurer Mike Nahan blamed the deteriorating budget on a $1.2 billion fall in GST grant revenue.
An estimated $533 million is attributed to the National Disability Insurance Scheme, which WA is running itself unlike the other states.
"What we got from an increase in iron ore royalties, the GST more than took back," Dr Nahan told reporters.
There was short-term good news, with the projected deficit falling from $3.38 billion to $3.02 billion, due mainly to better-than-expected iron ore prices.
The major parties are clashing over how to fix the budget.
The Liberals are proposing an $11 billion privatisation of 51 per cent of utility Western Power and government partners the Nationals want to introduce a $5 a tonne of iron ore mining tax on BHP Billiton and Rio Tinto, claiming it will raise $7.2 billion in four years.
Labor's focus is on reducing costs by cutting public sector spending through what it calls a "services priority review".
"We're now spending $121 billion (public sector) so I am very relaxed and confident about finding the sort of window we need across the recurrent spend of government," shadow treasurer Ben Wyatt told reporters.
WA's Chamber of Commerce and Industry chief economist Rick Newnham urged Labor to reconsider its opposition to the sale of Western Power, saying that and other assets should be privatised to fund job-creating infrastructure projects, while payroll tax should be eased for business.
