More cost cutting planned for WA govt

The West Australian government is poised to announce more cost-cutting measures as lower iron ore prices threaten to punch a big hole in the state's bottom line.

Iron ore prices hit a five-year low of $US81.90 a tonne last week, compared with the WA government's estimate for the year to June 30 of more than $US125 a tonne.

"While for the last financial year the state would have achieved a very good result and the treasurer will be able to announce that perhaps in the next week or so, we do face an element of a perfect storm," Premier Colin Barnett told reporters on Wednesday.

"Falling iron ore prices, GST falling in absolute dollar amounts - so we are going to have to take some measures to keep our finances strong."

Mr Barnett admitted the state government had been a big spender, but that had been on essential services. He also defended its decision to continue with a future fund.