McGowan, who is also State Development Minister, told the Chamber of Minerals and Energy of WA’s annual business lunch in Perth’s CBD that although he believed the proposal was “unwise” for three key reasons, miners should not dismiss the negativity it revealed.

Former WA Nationals leader Brendon Grylls claimed last month that miners spent up to $5 million to defeat his party’s proposed mining tax during the election campaign.

While Grylls ended up losing his seat to Labor’s Kevin Michael, McGowan said the $7 billion in benefits the former Nationals leader had claimed the tax would bring were “real”.

The tax would have raised the special lease rental fee BHP Billiton and Rio Tinto paid on their two biggest iron ore deposits from 25c per tonne to $5/t.

The scheme would then have been expanded to others.

The tax would have raised about $7 billion over years three to four years as a part solution to the state’s financial situation, which McGowan described yesterday as “dire”, with “extraordinary”debt and deficit levels even by Australian standards, as highest in the country of state and federal governments”.

However, he said the proposal was ultimately “unwise” and presented a sovereign risk to the state, primarily because “you cannot countenance ripping up state agreement acts unilaterally. If they are changed, they are changed by consent”.

Then there is the GST issue, where any revenue gain WA would get would be factored in to the GST redistribution. The state is already being hammered with a 34c in the dollar GST return.

“You might get that $7 billion up front, but it’s then redistributed after three to four years to the other states, while WA then endures the inevitable downturn in employment that the tax imposes,” McGowan said.

More important perhaps is the corporate social responsibility reality check the response to Grylls’ proposed tax caused.

“In the course of that debate there is, in some sections of the Australian community, particularly in some regional towns, a rich vein of hostility towards the mining industry that I find somewhat inexplicable at some levels,” McGowan said.

“Some people don’t appreciate the work of the mining industry. People on the street have expressed the reasons why to me which miners need to be very, very aware of and work to address.

“I don’t think there is often an understanding of the way a royalty system works, and if you want to pretend they exist, then politicians can do that and get away with it. So it needs to be properly explained.”

McGowan said arguments were often presented to him that that there was insufficient effort going into local content in WA.

He recalled often visiting workshops on the industrial strip in Kwinana while representing the seat of Rockingham, that were “extraordinarily quiet, indicating there’s all this work going on but we’re not getting any of it”.

“They ran good workshops and ran modern equipment, often imported from Germany, the US or Japan,” McGowan said.

“When the local highly-skilled tradespeople would do work it was to extraordinarily good quality.

“The local content argument is very powerful in WA, and I just urge the industry to understand that argument and always remember you might get a smaller margin interstate or overseas, but this is the place in which you’re doing business.

“So local content will continue to be important, and considering the experience the industry has just been through I’d like to see a real focus on local content, particularly when it comes to manufacturing and fabrication work in WA.”

McGowan said apprenticeships would also win over families concerned about their children’s future.

“A good way to assuage a lot of that hostility would be to guarantee a certain number of apprenticeships for students graduating from the local high schools,” he said.

McGowan also urged the miners to keep their offices in Perth and focus on local employment, “which is always foremost on the agenda of people in WA”.

He said the industry employed about 103,000 people, the vast majority in WA and while hiring from interstate or overseas during the boom was “totally understandable”, it was not so understandable now with 6.5% unemployment, 95,000 West Australians out of work and local tradespeople looking for jobs everywhere.