20/02/2013 - 01:04

Costs a factor in big-ticket items

20/02/2013 - 01:04


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Expect both sides of politics to slug it out until election day over the cost of their promises.

Expect both sides of politics to slug it out until election day over the cost of their promises.

ELECTION campaigns always have the capacity to generate their own momentum, and surprises; and this state election campaign is no exception.

What is not in dispute is that the ruling Liberal-National alliance entered the campaign with a winning lead in voter support. But Labor, with two bold big-ticket promises, has done more to capture voter attention.

However Labor supporters would be unwise to get too carried away. There are still some significant hurdles to overcome, including the issue of costs. And despite the billion-dollar-plus claims and counter claims of recent weeks, it would be unwise to seek to downplay the significance of the cost card.

With the leaders’ television debate now out of the way, and amid claims by each side that its leader was the more impressive, the parties are still slugging it out over the cost of their big-ticket items - especially public transport - and Labor’s pledge to move the new football stadium from Burswood to Kitchener Park in Subiaco.

Royalties for Regions has been a big winner for the government in rural Western Australia. The Nationals especially are hoping that voters will return the favour in the ballot box.

In the end, however, don’t underestimate the significance that the cost of election promises can have in determining how people vote. That’s why Treasurer Troy Buswell has been hammering away at the estimated cost of Labor’s comprehensive Metronet rail plan.

Labor leader Mark McGowan’s price tag is $3.8 billion to give the metropolitan area a significantly upgraded - and integrated - rail network. Mr Buswell says the Public Transport Authority has costed the plan at $6.4 billion; that’s a huge discrepancy.

Mr McGowan was smart to volunteer some other savings in addition to the estimated $300 million saved by relocating the football stadium, including putting plans for the long-awaited new museum on ice, and pulling out of the proposed port at Oakajee. He’s calculating that more voters will support his plan than oppose it, and that it will be seen as financially responsible.

The Liberals are placing their transport eggs into the light rail basket. In addition to the previously announced plan to link the northern suburb of Mirrabooka to the city, the Libs propose running lines to Curtin University in the south-east, and the University of WA to the west.

So sensitive is the transport issue that, just minutes after I raised the matter on ABC TV News last Friday, I received an SMS on my mobile phone from a veteran Liberal Party staffer.

“Metronet is a great fraud,” he said. “The public were never told until yesterday what they had to give up.”

Both sides are also committed to a rail link to Perth Airport, which has popular appeal. But hardheads are cautious about the merits of such an investment given experiences in other cities, and Perth’s love affair with the motor car.

However the sleeper over the next few weeks could be the cost of election promises. Premier Colin Barnett would remember only too well the closing days of the 2005 campaign when, as Liberal leader, he unveiled the privately assessed cost of his party’s promises, which contained a major gap. It robbed him of vital momentum in the last days of the campaign.

Neither party can afford the integrity of the price tag on their promises being vulnerable to a hostile 11th-hour onslaught this time. That would be too big a price to pay on March 9.

Mining tax fiasco

THE federal government’s experience with its much-vaunted Minerals Resource Rent Tax gives further credibility to the old saying, ‘conceive in haste, repent at leisure’. The fact that it raised only $126 million in its first six months should be a source of major embarrassment for Prime Minister Julia Gillard, and relief for the mining companies.

The government’s first failure with the tax was its inability to convince voters generally that the miners should be paying more tax. Sure, some were making massive profits, but they were also paying the same taxes that successful businesses pay - company tax, payroll tax, fuel tax, stamp duty etc, and royalties.

In fact the Minerals Council of Australia claims miners have paid more than $130 billion in company tax and royalties in the past 13 years.

The inaugural effort to sell the so-called ‘super profits’ tax was an ill-conceived attempt to exploit the politics of envy. And it pitted the less populous resource-rich states - think WA and Queensland - against the more populous states of Victoria and New South Wales.

It was all pure politics, and it backfired badly on the federal government. Then, Ms Gillard and Treasurer Wayne Swan went behind closed doors to negotiate a quick replacement tax with the three mining giants, BHP Billiton, Rio Tinto and Xstrata, and the MRRT was born.

The supposed big selling point as the 2010 election rapidly approached was classic quick fix stuff.

The tax would pay for an increase in the family tax benefit, supplementary income support and superannuation guarantee, and kick in to a regional infrastructure fund. Companies were also to be compensated for the royalties paid to state governments.

Those commitments still have to be honoured, without the requisite extra revenue.

And then Mr Swan decided to up the ante by putting the boot into three of the second-tier mining companies headed by Gina Rinehart, Andrew Forrest and Clive Palmer - all wealth creators - presumably because they criticised the tax.

While the slump in iron ore prices last year was an obvious setback for revenue raising, debate is now raging about flaws in the structure of the tax.

However Canberra should be under no misapprehension about one aspect of this disastrous adventure: don’t think for one minute that a state like WA would be prepared to give concessions on its capacity to raise money from royalties in return for some commonwealth sweetener.

WA, along with other states, abolished a number of so-called nuisance taxes in return for the promise that all revenue generated by the GST would be returned to the states.

What was not stressed at the time was that the carve-up would be done under the Commonwealth Grants Commission’s equalisation formula, which is turning out to be a bureaucratic dead hand on enterprise.

So Ms Gillard and the hapless Mr Swan would tamper with the tax, especially the royalties component, at their peril.

It’s true that Labor holds only three of the 15 House of Representatives seats in WA, so its stocks can’t sink much lower.

But the MRRT is now on the nose around the country, and the government has only itself to blame.



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