Western Australia risks missing the next wave of global resource investment unless it moves beyond its traditional "dig and ship" model, a major new report has found.
New analysis from the Bankwest Curtin Economics Centre (BCEC) "WA's Resources Sector in Transition" report, finds the resources sector still underpins the State's economy, contributing $200 billion each year and driving jobs, exports and government revenue.
But the report warns the conditions that have delivered decades of prosperity are rapidly shifting, with decarbonisation, technological change and intensifying global competition reshaping resource markets and that the next phase of growth will be driven by value not volume.
Report co-author and BCEC Director Professor Alan Duncan said Western Australia was entering a pivotal period and without a deliberate shift towards higher-value industries, processing and innovation, it risks being outpaced.
"For decades, our prosperity has been built on extracting and exporting resources," Professor Duncan said.
"That model has served Western Australia incredibly well, but the next chapter will look different.
"The big question is not whether we have the resources. It's whether we can create more jobs, more industries and more long-term value from them before they leave our shores."
The report found iron ore remains a cornerstone of WA's economy, generating around $126 billion in economic output and accounting for more than 80 per cent of WA's royalty revenue - but will account for a declining share in output over time.
At the same time, demand for critical minerals needed for batteries, electric vehicles, renewable energy and emerging technologies is expected to grow strongly over coming decades.
Report co-author Dr Silvia Salazar said WA had a rare opportunity to build on its existing strengths, if it acts now.
Under future scenarios modelled in the report, critical minerals, processing and other value-added industries could generate more than $100 billion a year by 2050 – a fivefold increase from around $20 billion today, she said.
At the same time, fossil fuel exports decline from around $39 billion in 2025 to approximately $11 billion by 2050 under the accelerated scenario.
"We have the minerals, the expertise and the global reputation to be a leader in the industries emerging from the global energy transition," Dr Salazar said.
"But success isn't guaranteed.
"Other countries are competing hard for the same opportunities, and if we want to capture a larger share of global demand we will need the right energy, infrastructure, skills and investment settings in place."
Mining and petroleum royalties delivered almost $10 billion to the WA Government last year, around one-fifth of total State revenue.
Professor Duncan said that level of reliance highlights the need for coordinated action across government, industry and the community to capture the full benefits of the transition and secure long-term prosperity for future generations.
"WA earned almost $10 billion last year from finite resources and that prompts an important question: what are we leaving behind for future generations?" he said.
"Resource wealth has helped build our hospitals, schools, roads and public services. But these resources won't last forever."
The report also examines a range of alternative fiscal settings, including royalty reform, changes to resource taxation arrangements and a hypothetical public equity stake in a major LNG development.
The modelling finds that relatively modest changes to fiscal settings can generate billions of dollars in additional public revenues.
For example, the approval of the Browse LNG project could generate tens of billions of dollars in additional state and Commonwealth revenues between now and 2050, while alternative royalty structures can materially alter the timing and distribution of those returns.
The report also finds that a hypothetical 30 per cent public equity stake in a new $50 billion LNG project could create a long-term revenue stream extending well beyond the productive life of the resource if returns were invested through a future fund model.
"One of the key lessons from the report is that policy settings matter," Professor Duncan said.
"The difference between one fiscal arrangement and another can amount to billions of dollars over the life of a project.
"The challenge is making sure today's mining wealth becomes tomorrow's industries, jobs and fiscal value.
"Every tonne we extract should help build a stronger future for Western Australia."
The report outlines a series of policy priorities to support a successful transition, including moving further up the value chain, investing in enabling infrastructure, strengthening innovation and productivity and building globally competitive industries linked to the energy transition.
