14/12/2018 - 11:26

Curbing wild election promises

14/12/2018 - 11:26

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Opinion: With the government seemingly on track to delivery a budget surplus, one key aspect of the Langoulant review is worth another look.

Curbing wild election promises
A return to a budget surplus in 2019-20 (a pre-election year) will pressure on Ben Wyatt to loosen the purse strings. Photo: Gabriel Oliveira

Opinion: With the government seemingly on track to delivery a budget surplus, one key aspect of the Langoulant review is worth another look.

Mark McGowan’s promise that the state budget will return to surplus in 2019-20, a year earlier than anticipated, is based on a combination of good management and good luck. 

It also reflects a clear improvement in Western Australia’s economic outlook.

Confidence is returning. The challenge now is to make the most of the improved financial position.

The speed of the financial turnaround has been almost as rapid as the collapse in revenue that preceded it, starting in 2013 due to the slump in commodity prices and WA’s slashed GST reimbursements.

The McGowan government inherited a record budget deficit, and state debt, in 2017. While its remedial action plan, including a savage wages policy and public service redundancies, and a better GST deal courtesy of Prime Minister Scott Morrison, have transformed the budget position, reversing the burgeoning net debt is akin to turning around a big ocean liner.

Latest estimates have net debt at $35 billion, compared with the budget forecast for this year of $39.1 billion. The rate of increase has slowed, but the government is still spending more than $1 billion annually in ‘dead’ money to service the debt.

Mr McGowan was obviously very chuffed when he outlined the improving financial position to 750 guests at the recent Committee for Economic Development of Australia ‘State of the State’ lunch. It’s a good result. The fact that public sector unions have copped the tough wages policy reflects credit on them, too.  But watch out for the quid pro quo.

The premier could have gone a step further and urged Western Australians, based on this newfound confidence, to go out and spend up big for Christmas. After all, new projects worth $95 billion are underway or likely in WA (see page 4), and farmers are anticipating a bumper harvest.

Christmas spending could indeed be strong, but it won’t be helped by the head-in-the-sand decision to cut back on the extra trading hours that retailers will enjoy before the holiday break. Last year the government simply duplicated the extra hours it inherited from the Barnett government. This year it surprisingly reduced the extra shopping opportunities, sending all the wrong signals to Christmas shoppers.

Extra hours make for more relaxed and convenient shopping and accommodate the tourist market, which the state is desperate to grow, when consumers are ready to spend. They also provide holiday job opportunities for casual workers such as high school and tertiary students, and retailers are better able to counter the increasing trend to online shopping.

It beggars belief that the Shop Distributive and Allied Employees Union would pressure the government to cut back on extra Christmas hours in such circumstances. Obviously early starts and late finishes can be inconvenient for some permanent staff (read ‘union members’), but surely such issues can be worked around. The risk for the union, and its members, is if more customers switch to online shopping as a result.

The return to budget surplus in 2019-20 – a pre-election year – will lead to pressure on Mr McGowan and Treasurer Ben Wyatt to loosen the purse strings. Ministers will be seeking election campaign sweeteners in their portfolios as a reward for the years of austerity.

Fair enough, but this is where an independent Parliamentary Budget Office would be valuable. As recommended in the Langoulant review of spending programs earlier this year, it would promote transparency in assessing the true cost of election promises by all parties.

In the 1980s, calls for open government from opposition parties were all the rage. Once in government, the same parties usually found openness a bridge too far.

Consequently, disputes over the cost of election promises have become an established, and time wasting, feature of election campaigns. Witness previous arguments over the cost of the proposed Ellenbrook rail line and the merits of the Metronet (Labor) and Max light rail (Liberal) promises.

Mr McGowan baulked at accepting the recommendation for a budget office earlier this year, when cutting costs was pre-eminent in the government’s thinking. 

But with a return to budget surpluses just around the corner, a modest investment in the office now could save millions of dollars from poorly thought-out promises down the track – a dividend well worth considering.

 


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