Issues testing our faith in markets

Three current but very different issues throw up some challenging questions about how much trust Western Australians place in markets.

First is the debate over reservation of some of WA’s gas reserves for use by local customers.

Next is the planned liberalisation of liquor licencing laws.

Third is Alinta’s acquisition of units in the listed energy utility Australian Pipeline Trust.

We profess to live in a free market economy but each of these issues, in their different ways, says something about how we grapple with life in a mixed economy, where regulations limit our activities.

The Labor government and the Liberal opposition agree that some form of regulation is needed to ensure gas supplies flow to industrial customers in our south-west corner at a reasonable price.

The politicians have tapped a fear that seems to run very deep in many Western Australians: that big business will export all of the gas if given half a chance, and we will be left high and dry, and the only way to protect “our” interests is to regulate. Rising petrol prices and political instability in the Middle East will only serve to heighten this fear about energy security.

Yet local company Wesfarmers has negotiated a supply deal with gas producer Santos, which is already supplying the Telfer gold mine in the Pilbara and plans to supply the NewGen power station at Kwinana.

Wesfarmers will convert its gas into LPG and use it as an alternative to diesel in remote power stations and heavy-haulage truck fleets.

It’s a wonderful example of how free markets throw up pleasant surprises (see story page 3).

Trucking companies like Mitchell Corporation have been quietly testing the LPG fuel for the past two years and results have convinced Wesfarmers to invest more than $130 million in the project.

On liquor licencing, Labor – and many people on the Liberal side – are keen to shed the paternalistic and anti-competitive regulations that currently stifle free enterprise.

Ironically, the most ardent opponent of change is an industry lobby group, the Australian Hotels’ Association, that wants to protect its existing members and in the process is stopping all potential entrants to the hospitality industry.

The government has a fight on its hands but, if it persists, will hopefully prevail on liquor reform, just like it did with energy reform.

Alinta has been one of the big winners from energy reform in WA and other states.

It’s a classic example of a nimble, flee-footed competitor that has shaken up the big incumbents in energy markets across Australia.

However Alinta’s play for APT has hit some big roadblocks, with the biggest being the Australian Competition and Consumer Commission.

The Takeovers Panel has also blocked Alinta’s path, prompting chief executive Bob Browning to describe the panel as flawed and call for ‘black letter law’ clarity.

Yet the panel is widely regarded as an outstanding success, applying sensible and pragmatic principles to its deliberations, keeping complex takeovers out of the courts and allowing the market to function effectively.

It’s a good example of light-handed regulation that should be applauded, not denigrated.

Tax cuts a no-brainer

The state government isn’t

winning any friends by withholding tax cuts. With a $2.26 billion surplus under its belt and just about every economist in the country forecasting continued strong growth, the government has plenty of scope to act.

By all means boost infrastructure spending and cut debt, as the government has done, but don’t forget tax reductions as well.

The art of government involves striking a careful balance between many competing interests, and in this case the government has failed.

The Chamber of Commerce and Industry says WA is now the highest taxing state on a per capita basis.

It’s a measure the government rejects, preferring to measure tax relative to gross state product, but either way the tax burden has risen substantially.

Treasurer Eric Ripper has presided over a succession of big spending budgets, and its time he focused more attention on structural reforms so that taxpayers can be offered some relief.