Counting the cost of Barnett’s binge

The Barnett years will be remembered for many things, but economic responsibility is not among them.

During the three enjoyable years I studied tertiary level economics, the orthodoxy was that governments should refrain from overspending in good times and loosen the shackles somewhat when times are tough.

Good times meant when workforces were fully employed, while times were considered tough when unemployment was high and rising, as is the case in Western Australia today.

Under such unwelcomed circumstances, governments should resort to borrowing, the opposite to what should occur during good times when revenues were allowed to exceed outlays (unless balanced budgets are presented).

However that economic management template was ignored during the Barnett government years of 2008-14, when mining royalties were growing rapidly and a whopping public debt accumulated.

Western Australia had been lucky Geoff Gallop appointed an outstanding treasurer, Eric Ripper, in 2001. To the state’s benefit, Mr Ripper remained in the role, even after a leadership change to Alan Carpenter in 2006, until 2008 as the state’s iron ore sector was steadily building up.

The measure of their excellence is seen in the fact that the debt Labor left in 2008 stood at a manageable $3.6 billion.

Today, with unemployment rising, bad times coming and state borrowings since 2008 having been boosted seven-fold, we’re up to our necks in debt and good times are a thing of the past.

The debt crisis is evidenced by the fact that the Barnett government’s most recent budget registered WA’s first deficit in 15 years.

And although the deficit was shown to be $431 million, it was in fact more than twice that.

Debt had risen by $2.62 billion during 2014-15 to a record $23.4 billion, meaning it grew at a rate of more than $7 million a day.

Fortunately for WA taxpayers, in May Mr Barnett had coaxed then prime minister Tony Abbott and his finance minister, WA Senator Mathias Cormann, into a one-off donation of $499 million to our cash strapped treasury. 

During the seven good years of 2008-14, therefore, the Barnett government added $20 billion to state debt.

Worse still is the fact that debt is headed for somewhere near the $28 billion mark.

If the $499 million gift hadn’t been forthcoming, last year’s shortfall would have reached $930 million.

Are prospects for next financial year likely to be better?

If not, will Senator Cormann’s Liberal Party and state loyalties be once again called upon?

Will new Liberal Prime Minister Malcolm Turnbull be as accommodating as Mr Abbott?

We’ll see.

Clearly, following Mr Ripper’s departure from treasury in February 2008, the eight-year tenure of Mr Barnett and his treasurers – Troy Buswell, Christian Porter, and Mike Nahan – has been a period of massive over-borrowing in unprecedented boom years.

Who’s responsible?

Certainly not Mr Ripper or his leaders; Dr Gallop stood by the orthodoxy he and I were taught. His successor, Mr Carpenter, showed the same restraint.

It can only be Mr Barnett or those three treasurers.

Let’s hope all three eventually volunteer for interview under the State Library’s Oral History Program so future generations can learn who put them so deeply and unnecessarily into long-term hock.

Until such transcripts are available we can’t be certain on who’s responsible.

In the meantime, here are some of Mr Barnett’s media statements on economic matters, which clearly demonstrate his shift away from fiscal orthodoxy.

In an ABC 7.30 Report interview in February 2005, Mr Barnett said: “I have made a decision that a future coalition government will immediately start work on building a canal to bring water from the Kimberley through the Pilbara, the Midwest, and to the southern part of WA.”

The canal on which work would “immediately start”, without costings, surveying and engineering work in place, was billed as a $2 billion venture, which a subsequent independent review (Options from Bringing Water to Perth from the Kimberley) costed at $14.5 billion.

Thankfully, Mr Barnett’s 2005 canal plan never re-surfaced after he narrowly won the next, the February 2008, election.

This may have been because Dr Gallop said in 2005: “It’s highly irresponsible to commit to a project before a proper feasibility has been done.”

But, $14.5 billion canal or not, sky-high spending and borrowing to support it became the order of the day. 

In 2010, Mr Barnett told a political affairs reporter he “had no plan to repay state debt, forecast this year at $15.4 billion. 

“In reality you don’t have to pay back the debt; what you have to do is make sure the debt is (under) control and as a guide I’m intending keeping our total level of net debt below $20 billion,” he said.

A truly amazing contention, one that surely adds new meaning to the idea of living on the never-never.

Five years on, the debt registered is at least $3.4 billion above that self-declared $20 billion ceiling, so by an amount nearly exactly the size of the Gallop/Ripper total 2008 debt.

To make matters worse, debt continues rising with WA’s AAA credit rating a thing of the past.