01/12/2017 - 15:10

Oppositions take populist position on budget repair

01/12/2017 - 15:10


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The opposition parties in Perth and Canberra are kicking the can down the road on debt, despite the parlous state of their respective budgetary positions.

Oppositions take  populist position on budget repair
WA’s opposition parties have largely thwarted Ben Wyatt’s budget repair plans. Photo: Attila Csaszar

Treasurer Ben Wyatt has probably never felt much sympathy for his federal Liberal counterpart, Scott Morrison.

Until now, that is, with the similarities of the challenges facing them far outweighing the differences.

Both preside over budgets in serious deficit, thanks largely to the irresponsible largesse of their predecessors. And both appear essentially powerless in their attempts at budget repair, thanks to the efforts of the perpetrators, who are now thwarting the process with the support of various upper house fellow travellers – through the Senate in Canberra and the Legislative Council in Perth.

Sadly, the naysayers don’t seem to have thought through the consequences of their short-term populist stance. In seeking to gain some quick-fix kudos from their support base they are simply deferring the day of reckoning. The problem of dealing with the challenge doesn’t go away; it simply gets kicked down the road, probably for others (perhaps the next generation of legislators) to deal with.

But the economic consequences for Western Australia could be dire.

At least former premier Colin Barnett was honest when breaking his silence recently about his two terms in power, conceding that he had spent too much.

He even gave his frontbench a backhander by stating that it lacked horsepower in the second term.

Regardless of the contortions involved in justifying the spending (a bit of good old-fashioned Keynesian pump priming to ensure WA was not caught up in the fallout from the 2008 GFC), it was clear that the recession threat would pass WA by as the $US54 billion Gorgon liquefied natural gas project on Barrow Island started to crank up.

Yet Mr Barnett continued to spend, through capital works and pay increases almost thrown at public sector workers, like there was no tomorrow. Unfortunately for him, and the state, revenue failed to keep pace.

It was a similar situation in the federal arena. The hapless federal Labor treasurer, Wayne Swan, kept predicting that the budget would be brought back into surplus (usually in the fourth year of the budget estimates) but in the end, no-one was listening to him. Yet he left his successors with two time bombs – how to pay for the proposed National Disabilities Insurance Scheme, and additional spending on education based on a report headed by businessman and philanthropist David Gonski.

Efforts by the first Liberal treasurer, Joe Hockey, to cut the deficit he inherited were thwarted by opposition senators, mainly on grounds of equity. Some savings were eventually achieved, but the problem has not gone away.

However, there could be a ray of hope at the federal level, with signs that economic recovery is generating additional revenue to close the gap.

No such luck in WA, although Treasury’s mid-year financial report later in December will be more definitive.

Mr Wyatt’s efforts at budget repair at the state level have met with mixed success. Labor had no problems hitting households with increased fees and charges from July 1. In fact electricity costs rose more than 10 per cent, despite Labor’s pre-election pitch that the Liberal commitment to sell Western Power as part of its own budget repair policy would be irresponsible and result in increased electricity charges. And significant concessions to self-funded retirees were scaled back.

The two key budget revenue measures met differing fates. The increased payroll tax for big business was accepted after much huffing and puffing, but two attempts to increase the royalty on gold, which is enjoying very healthy prices, hit the wall.

The moral for government here is, meddle with the miners at your peril. They might be exploiting a publicly owned resource, and getting a very useful return, but they won’t pay any more. They have deep pockets to fund strong advertising campaigns to push their case, and regional-based MLCs quickly fall in to line.

So the state will continue to have an annual budget deficit of around $3 billion, despite Mr Wyatt’s best efforts. And servicing the state’s accumulated  debt, even with the current record low interest rates, costs taxpayers more than $900 million annually. Dead money.

Liberal and Nationals WA MLCs, whose government overspent, as Mr Barnett has conceded, should give that serious thought. A further downgrading by the ratings agencies could be at stake.


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