26/05/2011 - 00:00

Barnett puts wedge to good effect

26/05/2011 - 00:00

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The state's decision to lift iron ore royalties has provided a headache for the federal government.

YOU’VE got to hand it to Colin Barnett. He appears to have used his government’s third state budget to wedge his critics on both sides of the country. They don’t know which way to turn.

Whether it be the decision to increase iron ore royalties, or the more modest rise in electricity and water charges – with the promise of more to come in future years – Mr Barnett and his treasurer, Christian Porter, appear to be teflon coated ... for the time being.

The decision to inject more than $600 million into non-government organisations, which deliver services to the less fortunate in the community, has given the premier the tag of the ‘compassionate conservative’, and made it harder for his political opponents to nail him down.

There are two strands to the increase in some royalties, which will generate an extra $1.9 million over four years. The first is that, although the increase is modest, the rationale is that it removes concessions that can no longer be justified, given the strong prices in the international market.

The second is the fact that royalties are a state prerogative. That questions the wisdom of the Commonwealth’s undertaking to reimburse companies for royalties paid to state governments when the proposed mining resource rent tax is introduced, presumably next year.

The conventional view on the east coast was that state governments were giving away their mineral resources to export companies for a song, that royalty rates were a joke. Hence the Commonwealth had to step in to ensure that all Australians, not just those in the states with the minerals, gained some benefit.

The Western Australian government has increased royalties twice in the past 12 months, and there’s been hardly a peep from the mining companies. The main reaction has come from the federal government.

One obvious reason is linked with the reimbursement undertaking, which won’t help the pledge to quickly return the federal budget to surplus. Canberra will have to ensure the miners are not out of pocket, a pledge Mr Barnett has always described as absurd.

The claim by Federal Treasurer Wayne Swan that the royalties increase was the “ultimate own goal” because of a likely drip in WA’s goods and services tax reimbursement was a good line, but it was dumb politics.

Mr Swan, a Queenslander, should be aware more than most of the inherent suspicion the outlying states have of Canberra-based decision making. After all, where are the prominent Western Australians on key national committees and decision-making bodies? Carmen Lawrence and Peter Tannock are part of a review of schools funding, but how many from WA have served on the powerful Commonwealth Grants Commission, which decides on the payments carve-up to the states?

And there are no locals on the review of the current payments headed by former NSW Liberal premier, Nick Greiner. There is no question about Mr Greiner’s bona fides; after all he was a reforming leader in NSW. But what about a role for former WA premiers like Richard Court or Geoff Gallop? They would have plenty to contribute as well.

Senior federal Labor MPs have accused Mr Barnett of throwing tantrums and hypocrisy over the royalties and GST issues. But, given the current political climate, they are skating on very thin ice indeed, especially when their WA colleagues already believe the state is getting a raw deal through the Grants Commission.

While Mr Porter has painted a worst-case scenario, suggesting that the state’s reimbursements could drop to 33 cents in every dollar paid in GST, Mr Barnett has proposed a floor of 75 cents in the dollar. Opposition leader Eric Ripper has gone one better, suggesting a 90 cents floor, with the rest being used to help subsidise financially weaker states. That’s something for his federal colleagues to think about.

Politically, Mr Barnett is on the side of the angels. On the one hand he is standing up for WA against Canberra – a sure local vote winner. But he is also handing out big money for needy causes to help the most vulnerable citizens. This helps blunt any attack on the continued increases in utility charges as part of the user-pays drive.

That is the Labor dilemma in WA. No matter how much Mr Swan might talk about own goals, Mr Barnett definitely has the edge on the scoreboard – for home games at least. But that’s where it counts most.

Middle-East wrap

PRESIDENT Barack Obama’s speech on the future of the Middle East, in which he said the Palestinian people must have the right to

govern themselves, came at the end of my two-week visit to this

troubled region.

The US president also called for a settlement of the Israeli-Palestinian conflict to create a non-militarised Palestinian state on the basis of Israel’s borders before 1967.

That the Israeli president, Benjamin Netanyahu, dismissed the pre-1967 borders as “indefensible” did not surprise observers. He has a reputation as a hardliner, and governs in coalition with groups sharing similar views.

But it is obvious to even the casual tourist that something will eventually have to give. Earlier this month, thousands of Palestinians stormed border crossings from Syria, Lebanon, Gaza and the West Bank, sharpening security concerns in Israel itself.

As a result, scores of heavily armed Israelis patrolled popular tourist spots, such as the Old City of Jerusalem, and even beaches on the shores of the Dead Sea, as bemused visitors floated effortlessly on their backs in the densely saline water.

The tension within Israel, especially in Jerusalem and at border crossings, contrasted sharply with

the more relaxed attitude in neighbouring Jordan.

And the security at Tel Aviv Airport was extremely tight. Members of our Australian group were herded into slow-moving queues, and several were singled out – apparently at random – for probing questions, including whether they had visited local residents, and who packed their bags. It took more than two hours to actually get to the departure lounge to fly to Amman.

In one sense that is comforting, given the heightened state of alert. But the question is: does Israel have to be governed like that, with the Palestinian residents continuing to be denied effective autonomy over their territory?

The ball is clearly in Mr Netanyahu’s court. A preparedness to negotiate, while holding out for some possible sweeteners from the US, could help ease the tension without being seen as a sign of weakness on Israel’s part.

One thing is certain; doing nothing will only lead to a continuation, and possible escalation, of current tensions. That won’t do anything for those Middle Eastern countries that rely so heavily on the tourism dollar to keep their economies ticking.

But do I have any misgivings about the timing of my visit? Not for one minute.

 

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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