When the price for iron ore went through the roof between 2009 and 2014, the Western Australian Government could not believe its luck.

The royalties rolling in allowed it to pay hefty wage rises to teachers and nurses and promise big ticket infrastructure.

In mid-2010, prices peaked at $US190 a tonne and even in May last year, they were about $US110.

In last year's budget, the State Government made spending commitments based on a price of $US122 a tonne, which was expected to raise $5.6 billion.

That was revised down to $US75 in December's mid-year review, blowing a $2.5 billion hole in the budget, but that price still proved to be too optimistic with it continuing to slide to $US46 in early April.

It has since rebounded to about $US60 a tonne but is still well below the State Treasury forecast.

Leading economist Saul Eslake said while forecasting was difficult, the Government should have erred on the side of caution.

We've committed ourselves to large spending programs assuming that commodity prices would always be at historic highs and that's simply not the case.

Guiliano Sala Tenna

"Six months ago, the WA Government could have chosen a more conservative forecast merely by aligning its numbers with those made by its federal colleagues," he said.

"They didn't and there's now a price being paid for that."

Giuliano Sala Tenna from Bell Potter Securities said a softening in demand should have been factored in.

"They have proven to be too optimistic and probably haven't taken into account the softening in demand in China combined with the increase in supply that's coming out of this state," he said.

"A degree of caution when making your forecasts in your budget papers should always be employed, it's always easier to under-promise and over deliver than the other way around.

"There were a number of policies put in place assuming that the good times would last forever.

"So we've committed ourselves to large spending programs assuming that commodity prices would always be at historic highs and that's simply not the case."

Mr Sala Tenna believed the situation the Government was in could have been avoided.

"Commodities more than anything simply go in cycles because higher prices encourage further investment into new projects, which then brings new supply into the market which leads to prices starting to come down, so there should have been a little bit more forethought with that," he said.

"A little bit more forward looking as to what would have been more realistic with long-term commodity prices could have potentially prevented them from committing to some of the large CAPEX (capital expenditure) projects which the Government have, which has now pushed them into deficits."

Setting aside windfall gains would have cushioned downturn

Critics argued the state has shown the same short-sightedness with the GST.

The formula for handing out revenue was always going to mean WA's share would fall away from its current 38 cents of every GST dollar to 30 cents from July.

That means WA's GST revenue will fall from $2.2 billion this year to $1.9 billion next year.

But it has gained little sympathy from the other states or leading economists.

"[The] West Australian Government's spent as if iron ore prices would stay at those levels forever rather than putting some of the windfall gains they were getting aside to cushion the downturn that's now being felt," Mr Eslake said.

He believed WA had squandered the benefits of the boom.

"I would say some of those benefits have been squandered at a state level and as is true of a national level," Mr Eslake said.

"But what I'd also say is even not withstanding that, Western Australia ought to be in a better financial position than it currently is.

"They could have set aside, in some kind of sovereign wealth fund, some of the revenue they were getting at the peak of the cycle when iron ore prices were at their highest, rather than committing all of that to spending.

"So the problem is only partly on the revenue side, it's also been on the spending side and in the failure to plan for the day that surely would have come when iron ore prices weren't nearly as high as where they were two or three years ago."

All in all, the double hit of falling iron ore prices and GST share means the promises the Government made in the good times will now have to be paid for in the bad.