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In search of a blueprint for business

THE business sector’s reaction to Eric Ripper’s second budget has been surprisingly positive, despite a few tax increases.

Business never likes a rise in taxes but it will always prefer something that is across the board in the community rather than a specific charge.

The Government has won some brownie points by dumping the idea of payroll tax on contractors, though the reality is it would have cost as much in compliance as would have been raised.

Another win for business is cuts in stamp duty on big trucks. This is something that was raised as part of the Business Review of Taxation.

However, I really feel the horse might have bolted on that one, with Queensland having grabbed a big slice of that business since the stamp duty was raised.

Those small wins largely balance out the negative sentiment in the property sector, which has been stung twice, both on transactions and a rise in a CBD car bay tax to pay for the CAT buses, which mainly service the retail sector.

In many ways this budget is benign.

Perhaps, the reaction to the premium property tax has had its effect. Or maybe it’s the other way around. After last year’s scare we are happy to accept anything that appears remotely sensible.

It seems this budget also helps preserve the State Government’s credibility, largely by keeping below the 45 per cent revenue to debt ratio (at least for short-term), which is a major requirement for maintaining a AAA rating.

Economists are concerned that the tight margins in the budget, based on achieving historically low increases in expenditure, will make it hard to maintain the AAA rating going forward. That is a fiscal challenge.

While there are some concerns that Mr Ripper will have to work hard to keep the budget in the black, economists suggest he deserves plaudits for achieving what he has and should be given the benefit of the doubt for the next year.

What would help this process is more regular reporting.

In a sense, the Government has been kept honest in the budget by being forced to report three times in the past year – the delayed September budget, plus a half-year review before this budget.

But the previous government apparently provided briefings as often as monthly, which meant we did not see off-the-mark predictions such as Access Economics’ pre-budget forecast, which was made on numbers several months old. This is a discipline that would be good for both the Government and observers.

The economists also believe this budget has some vision, but I think they are using that term very much as economists would.

What the boffins like is the State Government’s newly announced functional review, which they see as an expenditure review program by another name.

However, I don’t recognise that as vision.

Spending more on police and nurses might be comforting to the middle electorate but there is no big strategy beyond fiscal responsibility. For instance, there may have been a win in stopping the expansion of payroll tax but it remains among the highest in the country.

This is a very important area.

Salaries is another area where the Government needs to make cuts. With 40 per cent of the budget taken up by salaries, the estimates are that 10 per cent of this could easily be cut.

That’s where stamp duty on property is going – to pay wages.

Without such change we do little to invite new business to start up, and that’s at a time when we are seeing the battle against the tide of the branch economy being won.

The Government needs to do more to make it more attractive for outsiders to come here, to prompt new business to start up.

We have vast resources but our long-term future is using profits from those to improve our ability to compete for smarter people.

From what I hear from business people, they want to see a blueprint, a business plan for marketing WA to the rest of the world, working on our strengths to attract people to live here.

That’s what I would like to see too.

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