The State Government's plan to shelve the Max light rail project has come under attack, with critics claiming the delay will only worsen Perth's road congestion.

Yesterday, the Government revealed it would not make a decision on whether to build the light rail system until 2017, the year of the next State election.

It is just one of the cost-saving measures announced by Treasurer Troy Buswell in the mid-year budget review, as the Government tries to restore the state's AAA credit rating.

Mr Buswell has forecast an increased surplus of $438 million.

But Curtin University's Professor of Sustainability Peter Newman says private sector funds should be considered.

"The Americans are building light rail now mostly by doing these public-private partnerships," he said.

"You call for expressions of interest from different consortia who would build, own, and operate the system. They could do it with land development opportunities thrown in."

Professor Newman says the demand for rail transport is enormous in Perth.

"Rail is booming, both in Perth and in other cities around the world, so there is a new market that is being attracted to use railways," he said.

"It makes it feasible to do it in a public-private partnership in a way that hasn't been considered before.

"You've got to be a bit brave to try it out but it's better than just putting off into the never, never the opportunity which presents itself now".

Congestion cost

The RAC's Will Golsby says now is not the time to shelve vital infrastructure projects.

"Congestion is a cost to business, impacts on productivity and revenue, and is a weight on the economy which can't be ignored," he said.

"At the time the AAA credit rating was downgraded, it was estimated to cost around $23 million in interest payments across the forward estimates," he said.

"This is to be compared to, and is well below, congestion related costs of around an additional $75 million that will impact on the State's hip pocket this year.

"What we wanted the Government to do was hold their nerve and build for the future".

Mr Golsby says congestion is estimated to cost the economy $2.1 billion annually by 2020.

The Government still plans to go ahead with its other big ticket transport project, the airport rail link, although it will be pushed back until 2020.

The Perth Lord Mayor Lisa Scaffidi has criticised the decision to delay the light rail project.

Ms Scaffidi says the decision came as a shock.

"We were very disappointed to hear of the cancellation of the light rail route," she said

"We were very supportive of the idea of light rail to provide public transportation for masses of people from the northern part of our greater city into the City of Perth."

Health services in the firing line

The Health Services Union has criticised the State Government for removing money set aside for the redevelopment of Royal Perth Hospital.

The Government announced yesterday it will take $67 million allocated to the redevelopment and put it towards the transition and IT costs at the new Perth Children's Hospital.

The union's WA Secretary Dan Hill says that is a real risk.

"We won't see a dollar spent on actual changes at Royal Perth Hospital for at least another three years," he said.

"The infrastructure at Royal Perth Hospital is tired and old and if money isn't spent quickly then it runs the risk of falling into rack and ruin."

Mr Hill has also accused the State Government of wasting taxpayers money after it revealed delays to the new Fiona Stanley Hospital will cost more than $50 million.

The hospital was due to open next year but in June, the Government revealed the opening would be pushed back to 2015, blaming the scale and complexity of the project.

That delay will result in an extra $52.7 million being paid to Serco, the services provider for the hospital.

Mr Hill says the Government's management of the project is a disgrace.

"We see $53 million wasted due to a lack of planning and mismanagement, while the rest of the health system is suffering budget cuts," he said.

"So this is a risk of privatising public assets and public hospital services."

Industry welcomes the spending cuts

However, the WA Chamber of Commerce and Industry has welcomed the Government's moves to cut spending and try and regain the State's AAA credit rating.

Chief economist John Nicoloau believes the decision to delay the MAX light rail project is a good move.

"There's been an absence of any real business case to justify spending spare taxpayers dollars on such expensive projects," he said.

Mr Buswell also confirmed the government plans to sell a number of assets including the Kwinana bulk terminal and Kaleeya Hospital in Fremantle.

And the Government has refused to rule out further job losses within the public sector and is also reducing the procurement budget for a number of government departments by 10 per cent.