BOTH major parties have committed to big-spending projects in their bid to secure votes ahead of the upcoming state election.
Amid sizeable and growing state debt, however, industry leaders say whichever party forms government will have to make tough choices to ensure Western Australia retains its status as the economic powerhouse of the nation.
As voters prepare to go to the polls on March 9, the campaign looks set to be defined by a handful of big-ticket metropolitan infrastructure commitments.
Premier Colin Barnett and opposition leader Mark McGowan have traded blows over the past week on rival transport plans, the future of Perth’s waterfront development, and the location of a much-heralded new football stadium.
However, while both parties add to their spending commitments, questions remain over how they plan to rein-in the growing state debt. Ratings agency Moody’s last week reaffirmed its negative ratings outlook for WA, warning the state could lose its AAA credit rating unless it bridged the gap between revenue and debt.
State debt
Chamber of Minerals and Energy chief executive Reg Howard-Smith said the business community wanted a clear outline of how the parties planned to repay debt in the lead up to the election.
“The AAA rating is very critical - critical to the state government, because if they don’t have the AAA rating the debt that they’ve got and the borrowing is going to be more expensive, but it also sends a clear signal to the private sector,” Mr Howard-Smith told WA Business News.
“When your state has a AAA rating, the signal it sends is a very positive one; and when it doesn’t, the converse.”
Mr Howard-Smith said the next state government should encourage greater use of public private partnerships in order to curb debt.
“One of the things we’re encouraging government to do, regardless of who gets in, is to clearly articulate a PPP policy for Western Australia,” he said.
“They will clearly need private funding into some of the projects.
“PPPs in the east coast or anywhere else in the world have not (all) been successful but there’s now, I think, a good understanding of what makes a good PPP and what doesn’t.”
Labor plans to fund its $3.8 billion Metronet heavy-rail expansion through a raft of savings, including scrapping a $339 million commitment to the Oakajee port project and building the new football stadium at Subiaco rather than Burswood.
The government has not yet released equivalent savings plans for its major transport commitments, including the construction of a metropolitan light rail, which suggests there is likely to be further growth in debt.
Chamber of Commerce and Industry WA chief executive James Pearson said he was frustrated by the “obsession” with major urban infrastructure development, and concerned with the associated costs.
“I’ve been disturbed by the willingness of both major parties to promise major investments in infrastructure without spelling out clear benefits for WA,” Mr Pearson told WA Business News.
“The business community is frustrated by the failure of either major party to seriously address the concerns of the private sector, and yet the private sector is overwhelmingly responsible for investment in WA, the creation of wealth in WA and the generation of jobs in WA.”
Property Council of Australia WA executive director Joe Lenzo said he was pleased that both parties were offering public transport solutions to Perth’s traffic congestion issues.
However, he was concerned that it had not been made clear how campaign promises would be funded.
“That, to the business community, is a red flag because it could mean higher taxes, it could mean anything,” Mr Lenzo said.
“The property industry still provides 46 per cent of the total tax take of the state government, through stamp duty, land taxes and all those other taxes.
“That’s a heavy burden on one sector of the economy.”
The Property Council argues that property taxation has reached a crisis point and has called upon whichever party forms government to commit to a comprehensive business tax review, to be undertaken by an independent panel.
Tax reform
The issue of tax reform has become a rallying point for industry groups late in the campaign, with the CCIWA leading calls for the payroll tax liability threshold to be doubled to $1.5 million and then indexed.
Mr Pearson argues the tax creates a disincentive for employers to take on more staff, as changes to the liability threshold have not kept pace with wage increases over the past decade.
“We’ve said before that the payroll tax take by government over the past decade has increased from around $900 million a year to $3.3 billion a year,” Mr Pearson said.
“That’s something that governments of both political persuasions have become addicted to.
“We understand that they can’t kick the habit entirely. I don’t expect they’ll go cold turkey but I do expect they’ll at least lift the payroll tax burden on small businesses.”
Treasurer Troy Buswell told a WA Business News Success & Leadership breakfast this week that a re-elected Liberal government would increase the threshold by $100,000 over the next three years; however the CCIWA said this would provide “hardly any relief’. Labor has ruled out any changes leading in to the election, arguing it would be fiscally irresponsible to add to its spending commitments.
The Barnett government introduced a one-off payroll tax rebate in the 2011-12 budget, a move Mr Pearson described as welcome but ultimately ineffective.
“They (rebates) actually don’t do very much to stimulate employment growth,” he said.
“The rebate’s only there for one year and when you employ more people you usually give them jobs for more than just a year; you want to give them jobs to help grow your business over the long term.”
The chamber has also called upon the next state government to hand responsibility for setting electricity prices to an independent regulator free of political interference and to take further steps toward removing red tape, particularly in the retail sector.
Regulation
While groups such as the Business Council of Australia have acknowledged excessive government regulation of business in WA in recent years, the business figures spoken to by WA Business News said there had been a lack of action on the issue.
The Barnett government’s Red Tape Reduction Group, formed in early 2009, was tasked with identifying areas of excessive government regulation on business and consumers. While a report handed down by the group the following year contained 107 recommendations, the government was still considering its response as of late last year.
Association of Mining and Exploration Companies chief executive Simon Bennison told WA Business News he hoped to see a streamlining of complicated and costly approvals processes in the resources sector, which often resulted in duplication in the demands of different government agencies.
“A lot of these junior miners don’t have much available cash, and equity finance in the current market is extraordinarily hard to get, as reflected by the number of (initial public offerings) over the past 12 to 18 months,” Mr Bennison said.
“Each agency makes a demand on the industry. This has got to be rationalised and a bit of leadership shown in government. That’s going to be critical. The processes right now have got a lot of room for improvement from a cost point of view and a timing point of view.”
Industry sources said the government’s lead agency framework, which appoints the revevant department to take charge of projects involving multiple agencies, had been limited in its scope to major projects.
Mines and Petroleum Minister Norman Moore last week announced a $10 million expansion of the department’s online approvals tracking system, allowing mining companies to track the progress of their approvals regardless of which government agency was evaluating them.
Mr Bennison welcomed the move but said further reform should be a priority for the next government, highlighting the state’s environmental offsets policy as a classic example of flaws in approvals processes.
“There’s multiple policies, and there’s multiple agencies setting offsets, under terms and conditions which industry does not approve,” he said.
“It’s almost a form of extortion, the way that they structure it at the moment.”
Mr Howard-Smith echoed these comments, saying the average four-and-a-half year approvals timeline was too long.
“The duplication of regulation is a significant issue, and it’s certainly a significant issue for small miners or small gas exploration companies; but it’s also an issue for medium-sized and large ones,” Mr Howard-Smith said.
“I think at the large end of town they’re able to apply a lot more resources to approvals and that’s one area where this duplication of government regulation clearly shows up.
“For the smaller and intermediate (companies), it’s both cost and time. We’re not talking about a reduction in any standards. What we are talking about is this duplication and the time it takes.”
