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Budget helps bridge gap with business

With Geoff Gallop preparing to celebrate 500 days in power, WA Business News took the opportunity to talk to the premier about the issues that dominate the business agenda in this State.

FIVE hundred days may have passed since Geoff Gallop surprised many with an overwhelming show at the polls, but for the business community it feels like a new government started last month.

When Labor released its second budget, business breathed a collective sigh of relief.

They might just be able to do business with this government after all.

“There are always issues here and there,” said Dr Gallop, referring to some of the less welcome changes, such as the increases in stamp duty on property taxes.

“I have been pleased with the business response to the budget.”

The premier appears relaxed and comfortable discussing his Government’s performance and intentions, particularly in the economic sense.

But it hasn’t always been this way.

For most of the past 18 months Labor has offered little to assuage the cynics that it has the policies to steer WA in a sound economic direction.

Promises to wind back industrial relations reforms unleashed a new wave of union trouble, new ministers were struggling to come to grips with new portfolios, and new tax measures in the first budget proved so unpopular they were ditched.

Dr Gallop admits he had a big problem when the premium property tax was announced but denies Labor has a preoccupation with taxing society’s wealthiest citizens.

“We simply could not meet promises that were given with the revenues that were available,” he said.

“What you try to do is find the sort of tax measures that are fair and reasonable, in terms of that tax we just got it wrong, we targeted the wrong area, the response from the public was decisive.

“It was not part of any great design to transform WA.

“We are not targeting any particular group with tax.”

He also believes ministers are now much more accessible, following severe criticism from business soon after Labor won government.

“They were early day comments,” Dr Gallop said.

“I regularly meet selected business leaders to discuss issues of concern to the State.

“I don’t think there is any ongoing concern about access.”

Dr Gallop said, for instance, he and Minister for Consumer and Employment Protection John Kobelke recently met the newly formed Coalition of Business Associations to discuss the forthcoming IR legislation.

As for industrial relations, the premier disagrees that a wave of union disruption at construction sites last year, and the revelations at the Federal Government-sponsored Cole royal commission this year, make industrial change less palatable for the public.

“In the six months since introducing the legislation, I don’t think our Government has gone backwards. If anything, we have gone forward,” he said

“I don’t think there’s a groundswell of opinion out there in the community that unions shouldn’t get a fair go.

“The average Australian citizen wants fairness.

“The degree of resentment in the system building up under the previous system that was created by the previous government was underestimated. It was building up and at some point it would have come out.

“We think it [the new laws] provides better balance, it is fair and it certainly removes some of the discrimination against unions.”

But is Labor prepared to deal with the rogue elements in some unions?

The key test of any new set of rules, according to the WA Labor leader, is whether people are punished properly when they break the rules.

He believes the new legislation will have the right framework to deal with this issue and has met small business leaders regarding this matter.

Dr Gallop laughs at the mention of rules governing company directors, where those who breach the law regularly reappear on the corporate scene.

In many ways, business needs to be retrained in the art of industrial conflict.

“They [business] have got used to not having to even think about unions,” Dr Gallop said.

“They are fearful of something they have not had to deal with for a while.”

While the IR legislation is still a major sticking point between business and the Government, the recent budget has at least clarified some of the points of dispute between the two sides.

Business wants capital works, according to the premier, and this budget delivers that in a fiscally responsible way. That is, without a blow out in expenditure.

The government has also announced moves to cut back areas of the public sector.

“We have targeted 400 jobs for redeployment,” Dr Gallop said.

“That has not produced sufficient results, therefore we have offered redundancies.”

Among the other key areas is the review of business tax taking place, results of which would be announced soon, something Dr Gallop hoped would spark some debate ahead of any incorporation of change in the next budget.

“We are not in a position to have a radical reduction in business taxes but what we can do is simplify the system in a way that is reasonably neutral to the State,” he said. “We do want to ease the burden to some extent in terms of business taxes but we don’t have huge room there and I think everyone acknowledges that.

“We can remove nuisance taxes that are disadvantaging WA.”

The challenge will be to make up for lost revenue by adjusting remaining taxes accordingly.

“We are very keen to get a rational debate about this so we get a better system in the end. I think you will find it is a big issue in WA,” Dr Gallop said.

“Someone is going to win and someone is going to lose.”

One area business should not expect too much movement, despite efforts by other States to compete in the area, is payroll tax, where WA sits among the most costly.

“Payroll tax is very difficult,” Dr Gallop said.

“To get rid of it is enormously difficult because it is now very much part and parcel of the system.”

However, Dr Gallop is adamant that he is not trying to make business pay too much for any big social agenda.

In fact, he claims it is the opposite, with fiscal responsibility now acceptable among left-of-centre governments because it provides discipline.

“You don’t restrict your ability [in policy application]. If you become financially irresponsible it is the less fortunate in society who lose,” he said.

“Short-term responses to a social problem, that is not on the financial plan, it is not sustainable.”

However, Dr Gallop believes Labor’s social agenda has marked some achievements in the past 18 months, which will be good for business in the longer term.

“We are trying to reposition WA,” he said.

“We want WA to be seen by the rest of Australia and the world as progressive in outlook.”

Innovation was part of this.

“We want WA to be a progressive State within the federation and a strong economy in the global economy,” he said.

“We have put a huge effort into science and research and development.

“We are trying to make that more integral to everything we do. We will have $100 million over four years into that area.

“That is crucial for a modern economy. That is part of diversification.

“We are not picking winners in that sense. We trying to target strategic areas like research and development.”

Dr Gallop also pointed to efforts to facilitate investment in the State’s resource sector by providing infrastructure and encouraging development such as HIsmelt in Kwinana and the renewed activity at Burrup.

“We need to facilitate further development of our resource industry through the provision of infrastructure. That is very important,” he said.

Dr Gallop denies that a deal offered to Aboriginal groups at Burrup was a quick fix designed to push a big project though – something that would definitely be welcomed by the business lobby.

“Registered Native Title claimants have rights under Federal law. They can’t be ignored,” he said.

“We are negotiating with them in good faith to try to get a resolution of those issues, so there is no constraint on the development on the Burrup.”

“At the end of the day you have to make sure you are doing things properly. We won’t tick off on anything that we would regard as against the State’s interests.”

Labor’s approach, he said, was about negotiation rather than litigation, agreement rather than conflict. Dr Gallop said he hoped the approvals process for Native Title would be in place by the end of the year.

“We do want a resolution,” he said. “We are confident our approach will deliver long-lasting solutions.”

With Access Economics recording $87 billion in proposed investment in WA, the premier believes the fight with Canberra over funding is a critical issue.

“That [lack of funding] is limiting our ability to develop,” he said.

“Surpluses create space for capital works. Because we don’t get the revenue back from the Commonwealth we think we should through the Grants Commission. We are constrained in our capital works.

“We feel frustrated by that because we feel we can contribute a lot to Australia.

“If we had a better deal from the Commonwealth we would be spending a lot more on capital works.”

The rhetoric is something that WA business would indeed be comfortable with as the corporate community looks at the massive royalties syphoned east.

“We can create more jobs that are competitive internationally (than the east coast), and they are sustainable jobs,” Dr Gallop said.

He said there was a long list of priority capital works projects, with almost every corner of the State putting its hand up for infrastructure spending of one sort or another. Those that provided the best outcomes should be selected, Dr Gallop said.

The premier offers the Burrup and the major ports as areas already selected from that long list, and points to concerns about water as one significant issue for WA.

Another two key issues he wants dealt with during his first term are WA’s air services and electricity reform.

Labor is conducting a review of regional air policy following the collapse of Ansett.

Dr Gallop acknowledges business can’t operate properly in the regions unless air transport is adequate, but industry has been buoyed by the recent revival of Skywest and the long-awaited decision by Emirates to add Perth flights to its scheduling.

“We still have a problem. We have to guarantee flights otherwise you can’t have tourism, that is crucial for WA,” he said.

“We are a long way away from everywhere.”

While Labor remained anti-privatisation, there is another element of selling it was prepared to embrace, though Dr Gallop admitted there was much more to do – the issue of selling, in the marketing sense, WA itself.

“I would like to do more,” he said. “I am frustrated by that issue. I want to sell a lot more within Australia and internationally.

“I think we are a very good story.”

He believes the tourism industry has done a good job but could go further, with initiatives like the new office established in Dubai as an example of that.

“We are in a very competitive marketplace. We need to promote the State vigorously,” the premier said.

But it is clear that this is not a big item on the Labor agenda, with the business focus linked to preparing the groundwork here rather than promotion elsewhere.

Dr Gallop believes that formula has been successful, and he wants to continue it.

“Over a period of time we have built up our infrastructure and capacity on a successful export industry,” he said.

“With that capacity comes all the skills. The expansion of the State brings those benefits.

“We think the best way to deliver results is to build up our industrial capacity.”

In this respect, it is clear WA won’t be entering into the tax incentive race or offering special deals to companies encouraging them to base themselves here.

Dr Gallop sees that as artificial.

“Effectively, you have to create a sound base, including a place where top level managers of globally focused companies will want to live,” he said.

“One thing you have to do is have a good city. These managers have families and those families like to have a good way of life”

And, he said, that livability is linked to sustainability – something he would like to leave as his mark.

“An internationally competitive economy is sustainable but it needs to be underpinned by a strong community and needs to respect its environment,” he said.



* Geoff Gallop will speak at a WA Business News breakfast on Wednesday June 26.

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