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May 15 2012, 6:42PM

The West Australian government has dismissed a report claiming the state cannot afford a Norway-style sovereign wealth fund - just as it prepares to unveil its own.

Business lobby group the Chamber of Commerce and Industry of WA (CCIWA) on Tuesday released a report on the proposal, saying the state would be financially straightjacketed by such a fund.

CCIWA chief economist John Nicolaou said it appeared to be a luxury WA could not afford, with both the federal and state governments facing declining revenue, growing debt levels and wafer-thin surpluses.

Premier Colin Barnett last year flagged the possibility of establishing a sovereign wealth fund that would quarantine a portion of WA's royalty income or budget surpluses to ensure future generations could benefit from the state's strong resources sector.

Treasurer Christian Porter said he had seen CCIWA's draft report, which he believed made some fair observations about some of the difficulties associated with future funds.

"But I don't consider that those general observations will be particularly relevant to the specifics of the fund that will be announced on Thursday," Mr Porter said.

"The establishment of the future fund will not be at the expense of the Liberal-National government's record infrastructure program."

Opposition Leader Mark McGowan said the concept of a future fund was not necessarily a bad one.

"However in this instance it would seem like a diversion tactic to take attention away from the enormous debt that this government is leaving future generations with," Mr McGowan said.

The WA government forecast in its mid-year economic review a steady rise in total revenue in coming years despite falling GST payments from the commonwealth, but net debt is expected to soar from $236 million in 2011 to $3.5 billion in 2012.

Mr Nicolaou said the fund could leave the state with little money to deal with the challenges it faces including the need to invest in infrastructure to help support its growing population.

"Instead we need to be investing in supply-side reforms that will boost productivity and competitiveness of WA industry," he said.

The fund will be announced with the WA government's 2012/13 budget on Thursday.