Ripper said increased royalties from the State's petroleum industry had ensured the surplus would exceed the $52.9 million for 2002-03 forecast in December's mid-year economic review. The Government's third Budget is due to come down on 8 May.

Nevertheless, Ripper told the West Australian newspaper that the Budget would be tough as the State's finances had been hit by an effective decrease in Commonwealth grants - which account for 45% of WA' revenue - and were vulnerable to fluctuations in the oil price and value of the Australian dollar.

Every one dollar increase in the market price of a barrel of oil generates an extra $20 million in petroleum royalties for the State Government, according to the report.

The Gallop Government made the assumption that the oil price would average $US23 a barrel (bbl) during the year but the price of oil recently exceed $US30 bbl.