Prime Minister Julia Gillard says Western Australia will get less money for major projects and in GST payments following tax changes by the Barnett government.

The WA coalition government on Thursday announced it would increase the royalty rate for iron ore fines to 6.5 per cent as of July 1, 2012, then to 7.5 per cent the following year.

It is expected to net the WA government $2 billion over three years.

Under the minerals resources rent tax deal with the big mining companies, the federal government must credit them back with money they pay into state coffers, meaning the Gillard government could be short $2 billion under the new WA arrangement.

Ms Gillard told reporters in Adelaide the decision - which ran contrary to the coalition's campaign against higher mining taxes - would end up costing WA in terms of GST revenue and infrastructure.