WA's Iron Ore Royalty Regime: Are Mining Companies Paying a Fair Share?

Western Australia's iron ore industry generated $107 billion in export revenue in 2022–23 alone. The Pilbara region is home to some of the largest and highest-grade iron ore deposits on Earth - a geological jackpot that took billions of years to form and belongs, at least in principle, to all Australians.

So how much do the companies extracting and selling that ore pay back to the public?

The answer might surprise you.

What the Royalty Regime Actually Looks Like

In Western Australia, iron ore royalties are set by the state government and collected by the Department of Mines, Industry Regulation and Safety. The current rates are:

At 7.5%, WA's headline rate sounds reasonable until you compare it globally. Chile charges up to 14% on copper. Norway takes a 78% marginal tax on oil profits. Even Queensland's coal royalty rates were recently restructured to reach up to 40% at high price tiers.

WA's iron ore rate, by contrast, has been largely static since the 1980s - a period when iron ore prices were a fraction of what they are today.

The Numbers That Should Make You Angry

In the 2022–23 financial year, the WA government collected approximately $13.7 billion in iron ore royalties - a record, and a significant contributor to the state's budget surplus.

That sounds like a lot. But consider:

• Rio Tinto's Pilbara operations alone generated $US21.4 billion in underlying earnings in 2022 - after costs, after royalties, after tax.
• BHP's iron ore division reported $US13.6 billion in EBITDA from Australian operations in the same period.
• Fortescue Metals Group posted an underlying NPAT of $US6.2 billion in FY2023.

These are not struggling businesses. They are among the most profitable mining operations on the planet, extracting a finite, publicly-owned resource from Australian soil - and they are doing so under a royalty framework designed in an era of $20-per-tonne iron ore. The price today regularly exceeds $100–120 per tonne.

A back-of-envelope calculation tells the story: if WA applied a tiered royalty similar to Queensland's coal framework - increasing the rate as prices rise above certain thresholds - the state could have collected billions more during the recent commodity boom without touching a single job or disrupting a single operation.

Why Hasn't This Changed?

This is where the politics gets uncomfortable - for both major parties.

The Liberal Party has historically positioned itself as the natural ally of the mining industry, opposing royalty increases on the basis that they deter investment. During the Barnett government years (2008–2017), iron ore royalties were actually a political battleground - but the fight was about the federal government's attempt to claw back revenue through the Resource Super Profits Tax, not about WA increasing its own take.

The Labor Party, currently in government in WA under Premier Roger Cook (succeeding Mark McGowan), has benefited enormously from royalty windfalls but has shown no appetite to structurally reform the rate. Why? Because a booming budget surplus is politically convenient, the industry employs tens of thousands of Western Australians directly and indirectly, and the companies themselves are extraordinarily well-resourced political operators.

The 2010 "Mining Tax" saga at the federal level is instructive. When the Rudd government proposed a 40% Resource Super Profits Tax, the mining industry launched a $22 million advertising campaign that helped destabilise the prime ministership. The lesson both parties took away was clear: don't pick a fight with mining companies.

The result is a quiet, ongoing arrangement that persists not because it's fair, but because it's politically safe.

Who Bears the Cost?

The people who lose out from an underpriced royalty regime are diffuse and largely invisible:

• Future generations, who will inherit depleted ore bodies with less public wealth banked from their extraction
• Regional WA communities, which host the environmental and social costs of mining but receive limited direct royalty redistribution
• Every Australian taxpayer, given that Commonwealth tax settings interact with state royalties in ways that affect the federal budget
• Public services, which could be better funded if a non-renewable resource were monetised more effectively during peak price cycles

The winners, by contrast, are highly concentrated: three companies - BHP, Rio Tinto, and Fortescue - account for the overwhelming majority of WA iron ore production.

What Would Voters Actually Choose?

Here's what we know from public polling and international precedent: when citizens are directly asked whether multinational corporations should pay more for extracting publicly-owned, non-renewable resources during record profit periods, the answer is almost always yes.

A 2023 Australia Institute survey found that 78% of Australians supported higher taxes on mining company profits during commodity booms. That's not a left-wing position - it's a common-sense one that crosses party lines.

But our political system isn't designed to act on common sense. It's designed to manage competing interests, and industries with deep pockets and organised lobbying capacity consistently punch above their democratic weight.

This is precisely why direct democracy matters. When citizens can vote directly on policy - rather than delegating that power to representatives who face industry pressure, donation cycles, and career incentives - outcomes tend to reflect what the public actually wants, not what the most organised interest group can negotiate behind closed doors.

The iron ore royalty question isn't technically complex. The evidence is clear. The public view is clear. What's missing is a political mechanism that allows that view to actually drive the outcome.

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