As his final year in parliament wraps up, Mike Nahan reflects on his passion for free-market values, a guiding force during his time as state treasurer.
As his final year in parliament wraps up, Mike Nahan reflects on his passion for free-market values, a guiding force during his time as state treasurer.
IF an aspiring treasurer could choose the ideal time to step into the portfolio in Western Australia, March 2014 would not be it.
Mike Nahan was afforded no such luxury of timing, however.
Having served as the state’s finance minister after winning a second term as the Member for Riverton District, Dr Nahan was tasked with stabilising the budget while the resources boom faded in the early stages of Colin Barnett’s second term as premier.
The December 2013 mid-year budget review had forecast spending growth of 9.3 per cent, and revenue growth of 9.9 per cent.
But it was becoming clear the next few budgets would need to be much more restrained.
A long-time advocate for limited government, Dr Nahan took the reins when his predecessor, Troy Buswell, stepped aside.
Dr Nahan’s first budget was tight.
Revenue and spending growth were both projected to be 2.6 per cent, with $2 billion of savings building upon almost $7 billion announced the previous year.
Things didn’t get much easier as revenue forecasts worsened.
The 2015 budget was hit by revenue write-downs of $10 billion as iron ore royalties fell, resources construction slowed, and the state’s share of the GST declined.
“For somebody from my background who lectured governments on fiscal responsibility, it was hard to be put into a seat with the largest deficit in state history,” Dr Nahan told Business News.
“In life you have to deal with the cards you are laid.
“No-one else had the commitment and knowledge to mitigate the growth in expenditure like I did.
“I look back and say … I was best placed to play that ugly hand.”
Image: Spending growth, actual, by financial year.
Spending growth during Dr Nahan’s tenure was 2.2 per cent, 2.4 per cent and 3.1 per cent, which compares favourably to most years since the start of the resources boom (see graphic).
For what it’s worth, his final budget projected spending growth would continue at a low pace in the years that followed.
The moves included a hiring freeze, cuts in non-essential procurement, deferral of infrastructure, shrinking the public sector, and agency spending reviews.
On the revenue side there were increases to land tax and grants secured from the federal government to counteract the declining GST.
Probably the most significant policy change was a $1 billion cap on the Royalties for Regions program for the 2015 financial year.
“We were going through a really difficult time in the midst of the mentality of boom times, and politically it became very difficult,” Dr Nahan said.
“I implemented every idea of reform I could come up with.”
While Mr Barnett had a reputation for big spending, Dr Nahan said the premier had swung hard behind the fiscal consolidation.
There was one issue where consensus was lacking, however: privatisation.
The government sold the Perth Market Authority and worked on potential sales of the TAB, Fremantle Ports, Utah Point bulk terminal and part of Synergy’s generation portfolio.
The Fremantle Ports sale hit a political roadblock, while the TAB betting agency privatisation has slowly progressed under the McGowan Labor government.
The biggest proposal was Western Power, which owns the state’s electricity grid.
Network and transmission assets have been sold or partly privatised in many other states, reducing debt levels, funding infrastructure, and putting downward pressure on network transmission costs.
But this would present a political challenge.
Mr Barnett had ruled out a sale at the 2013 election and was not an advocate for private ownership.
After years of debate, an agreement was reached in November 2016 and a partial sale planned that was projected to reduce debt by $11 billion.
“The only reason I got the privatisation of Western Power up [was] I was going to leave in July the previous year,” Dr Nahan said.
“I couldn’t live with it. We had to find a circuit breaker to bring our debts down, and to fund [infrastructure].”
A decision in November came too late, however, and left the government open to a union and Labor campaign against privatisation ahead of the March 2017 election.
The Liberal Party largely avoided advocating the sale of Western Power ahead of the poll.
“We should’ve sold [Western Power] right from 2013,” Dr Nahan said.
“There’s no need for a government with that much debt to own an asset that’s totally regulated in terms of return.”
After the government’s huge loss at the 2017 election, Dr Nahan stepped up as opposition leader, although he knew he would be 70 by the time of the 2021 poll.
He served in that role more than two years, winning a seat back from Labor in the Darling Range by-election.
As Dr Nahan watched from the opposition benches, the federal government’s financial situation improved and GST distribution became more advantageous to WA, while iron ore prices surged and brought higher revenue.
Strong values
Working in international development in his early years helped Dr Nahan become an advocate for free markets.
The seeds of that belief were probably planted even earlier.
He was born in rural Michigan in 1950, the fourth child of 12.
“Sometimes mum would cook five pounds of potatoes and we’d eat a whole turkey in one sitting, a 20 pounder, Dr Nahan said.
“We grew up on the land, we had our own vegetables and fruit.
“I knew I didn’t want to be a farmer.
“It’s hard to be an individual in that large group.
“You own nothing individually, even your bicycles.
“Your beds get shifted around, I inherited my brother’s clothes.”
He played high school and college football, first as a quarterback and then as a punter.
After studying maths and taking an interest in economics, the young Nahan joined the US Peace Corps and helped build fishing cooperatives in Malaysia, where he observed economies controlled by national plans.
“I saw how government plans were incompetent,” Dr Nahan said.
“We had fishing cooperatives, state funded, next door to private businesses; they were thriving, we were dying.”
That served as a practical example of how principles such as property rights and reward for effort worked effectively.
Big government would stifle innovation and technological progress, he said.
Dr Nahan studied economics at the Australian National University and worked across South-East Asia on economic development, including through the World Bank.
It was in Canberra he met his (now) wife, Nyuk, who had been the top social science student in Malaysia.
Because she was at an earlier stage in her career, Dr Nahan said he would follow Nyuk wherever she was offered a job, leading him to Perth, where she became a law lecturer at the University of Western Australia.
In WA, he worked on reviews of royalties for gold, and recommended a rent tax for a petroleum development on Barrow Island.
It was in 1980s WA where he had his first real exposure to the political world while working in the public sector.
The government acquisition of Fremantle Gas and Coke Company came across his desk for analysis.
The numbers didn’t add up, and the deal later became part of the WA Inc saga.
“They asked me to put my name on it,” Dr Nahan said.
“I walked out the door.
“Colin [Barnett] and I came into public policy … at a time when it took a lot of guts to expose this stuff [WA Inc deals].
“The state went through a hell of a turmoil.”
Dr Nahan then headed up the Institute of Public Affairs, and said he was proud to have kept the organisation financially viable and contributing positively to debates, including on Native Title.
Decades later, when Dr Nahan ran as the candidate for the marginal seat of Riverton in 2008, a Corruption and Crime Commission investigation of then member Tony McRae was among the factors that contibuted to Dr Nahan’s 64-vote victory.
Winning the seat, and retaining it through the huge 2017 swings away from the Liberal Party, earned Dr Nahan a reputation as a hard campaigner.
“I doorknocked the whole place, day-in, day-out,” he said.
Riverton was a particularly good fit for his family because it was an aspirational and multicultural electorate, and voters were focused on education, Dr Nahan said.
“I had spent my life telling politicians what to do, I thought maybe I should join them to do it,” he said.
The Riverton victory helped Mr Barnett form an alliance government with the Nationals and independents.
That deal set up the Royalties for Regions scheme, but the GFC hit just weeks later.
In that first term, the government set about its bigger picture infrastructure investment, and raised wages for public servants such as teachers to fix shortages of workers.
But it also locked in spending Dr Nahan later needed to tighten.
