Western Australia state seeks debt support - paper

SYDNEY, March 18 (Reuters) - Australia's main mining state of Western Australia has asked the national government for help to raise A$1.3 billion ($858 million) in debt, a newspaper said on Wednesday, in another sign that state finances face trouble.

Australia's six states use the A$100 billion semi-government bond market to finance much of their infrastructure spending, but their paper has lost some of its appeal as state finances worsen and as other top-rated issuers crowd the market for funds.

The Australian Financial Review said it had obtained a confidential briefing paper from the Western Australia state government which called for Canberra to authorise its national debt agency to buy the state's bonds.

Western Australia would then buy back the bonds from the agency, the Australian Office of Financial Management, when market conditions improved, the newspaper added.

The Review quotes Tim Marney, chairman of Western Australia's treasury arm, saying in the paper that it would be very difficult to raise the A$1.3 billion in long-term finance by June 30 because demand for long-dated state bonds had collapsed.

Australian states' finances have been hit hard by a sharp economic slowdown, especially the mining-heavy states of Western Australia and Queensland. Their problems have been compounded by competition for top-rated paper from the local commercial banks, whose liabilities have been guaranteed by Canberra.

The national government is also issuing more of its own triple-A-rated paper into the market as it moves into budget deficit for the first time in eight years. (Reporting by Mark Bendeich; Editing by James Thornhill)