Mixed signals from WA economy

THE treasurer, Christian Porter, would be entitled to a sense of confusion as he puts the finishing touches on his first – and the Liberal-National government’s third – state budget, to be delivered on May 19. His task is made harder because two sets of key data are showing contrasting trends.

The first are the indicators, which revealed that Western Australia’s economy actually contracted for two quarters in a row. According to economists, that’s a recession.

But when the employment statistics for March surfaced, the state still had the lowest jobless rate for the mainland states of 4.2 per cent. And WA also accounted for one-third of the 38,000 extra jobs created across the country. Not bad for a recession.

Mr Porter knows the answer is that the resources section of the economy is booming. Led by Chevron’s $43 billion Gorgon project, the sector is charging ahead, snapping up skilled workers wherever they can be found, and paying them big money.

But the rest of the economy – whether retail, construction or property, to name just three key sectors – is just chugging along, yet to regain full confidence after the global financial crisis. And consumers have put the brakes on their spending, preferring to save while they see which way the economy is going to go.

While the federal government is talking up a tough budget from Canberra next month, the word from the State Treasury bunker is that Mr Porter is preparing to fill the vacuum caused by tardy local consumers and small business, and reassure Western Australians that the future is bright. It could be said that the treasurer and his team are about to ‘prime the pump’.

Consider some of the projects that are ready to proceed alongside work on the $1.7 billion Fiona Stanley Hospital at Murdoch, which is gathering pace in readiness for opening in 2014.

The big-ticket item will be the long-awaited $1 billion-plus sports stadium. Premier Colin Barnett has kept the project on ice for two years, and now must bite the bullet. He’s promised to announce the venue, cost and completion date by ‘mid-year’, and provision is expected to be made for the initial preparatory work in the budget.

The Northbridge Link, involving sinking both the railway line and the Wellington Street bus station, will happen after many false starts. I recall attending a news conference in 1973 with then Labor works minister, Colin Jamieson, unveiling a plan to do much the same thing. The key difference is that the money is there this time.

And in October, Queen Elizabeth is expected to turn the first sod for another project that has had plenty of false starts – redevelopment of the Perth foreshore.

These are all big commitments, and when combined with increased activity in hospital construction, let alone education and road works, will mean plenty of work for the construction sector. And that has a knock-on effect through the economy.

But there’s more. The premier is about to make good his promise to the private welfare sector, as part of his plan to increase the profile of the not-for-profit industry in providing social services. Mr Barnett has long held a philosophical approach that the private sector is able to deliver services to the needy more efficiently and effectively than government.

Areas requiring increased attention include drug and domestic violence counselling, disabilities, homelessness, and people battling to meet their rents and household expenses.

But there has been one major snag to giving more responsibility to the private sector. Non-government organisation (NGO) employees have, in the main, received lower salaries than their public sector counterparts. On average the gap has been estimated at 30 per cent – or more than $200 million a year.

The WA Council of Social Services has said NGOs are prepared to shoulder a bigger burden of the service delivery load, but not ‘on the cheap’. More assistance is essential to close the pay gap, and reduce the turnover of key staff attracted by higher salaries elsewhere. Mr Barnett has said he acknowledges the problem, and will take steps to resolve it. That will cost millions.

If the strategy is implemented, as now seems certain, it will represent a significant policy shift. And Mr Porter will be able to thank the booming resources sector for generating the extra revenue for a major reform aimed at helping battlers.

Sugar coating power

THE next state election might still be 23 months away, but the government is already laying the groundwork to defuse a potential major vote loser.

Electricity prices have increased almost 50 per cent since the Liberal-National alliance was elected in 2008; and they will rise again in next month’s Budget.

Water charges have jumped too, with the opposition leader, Eric Ripper, saying more than 1,000 consumers have been taken to court for failing to pay their bills.

He also says about 20,000 consumers are getting visits from private debt collectors for not paying for their power.

Then there are thousands more who are cutting back on spending elsewhere to cover their power and water bills, as the government continues on its full cost recovery strategy.

Now the Office of Energy is sounding out community groups on the possibility of introducing a new pricing structure designed to ease the burden on low-income households with low energy consumption.

Alternative structures being tested at the group meetings, organised in association with the WA Council of Social Services, include ‘inclining block tariffs’ (IBT), and charges based on the time of the year – or day – and the region in which the consumer lives.

A discussion paper prepared for the groups says that the inclining tariff is the main alternative under consideration.

The paper says: “Under an IBT structure, the price of electricity is lower for lower levels of consumption, up to a certain threshold. Consumption exceeding the threshold ... is then charged at a higher price. This means the more electricity people use, the more they will pay per unit. This is very similar to the way water use is currently charged in WA.

“The lowest block of consumption can be designed at a level that covers the majority of the average household’s essential electricity consumption,” the paper says.

The groups are also asked to assess the effectiveness of the current policy on concessions and rebates.

“An objective of the ... review is to design concessions in a way that ensures that disadvantaged households would not be any worse off under an alternative tariff structure than they are under the present system,” the paper says.

An issues paper incorporating the feedback from the groups is due later this month, followed by a survey on the use of energy by households in June. The findings will then go to the Energy Minister Peter Collier before Christmas. That gives the government time to digest the proposals for incorporation into next year’s pre-election budget.

Perfect timing to sugar coat the final round of power bill increases.