Well-known as a ‘boom denier’, Colin Barnett has added another string to his bow – recession rejecter.
Well-known as a 'boom denier', Colin Barnett has added another string to his bow – recession rejecter.
Premier Colin Barnett continues to exude confidence that his government will buck the national trend and a softening economy to deliver more surplus budgets, however small.
His admission any surpluses will be “very thin” is clear confirmation that the days of the ‘turbo-charged economy’ – a term coined by Labor treasurer Eric Ripper when he was announcing surpluses of more than $1 billion – are well and truly past. Prudent financial management is now the key.
The success of last-minute corrective measures, such as slashing 1,000 jobs and deferring a promised business tax cut worth more than $500 million, now hold the key to the premier's commitment to never preside over a deficit budget.
Mr Barnett spoke frankly about Western Australia’s economic outlook at a business forum sponsored by The Australian newspaper to assess prospects ‘on the other side of the boom’.
The premier stuck to his line that he was a boom denier and threw in a new tag, based on the controversial interpretation of some recent growth figures, that he was a ‘recession rejecter’.
He predicted the economy would continue to grow at an annual rate of between 4 and 6 per cent over the next few years, despite the fact that some major resources projects have been deferred and jobs have been cut in mining ventures in both the Pilbara and the Mid West.
Normally such strong growth rates would have heralded healthy budget surpluses, but not in the current environment amid significant instability in key revenue sources.
For example, Mr Barnett described the growth in revenue from royalties as “slower and unstable”.
“The GST, which was meant to be a stable income, is falling (in absolute terms), and is now a risk factor. We will get $400 million less in GST next year than we did this year,” he added.
While Mr Barnett was speaking, members of the Legislative Council were heading home for the winter recess after a marathon all night session, which had the sole purpose of ensuring the budget remains in surplus.
They were debating a government bill reversing a $527 million tax cut, which would have abolished stamp duty on non-real business assets such as goodwill and intellectual property. The measure had been legislated to apply from the start of the new financial year and was linked with the introduction of the GST 13 years ago. The deal provided for the phasing out of a number of small taxes, in return for the GST.
These charges included the stamp duty on non-real business assets. But Mr Barnett and treasurer Troy Buswell continue to need the extra money both to offset the declining share of the GST coming their way, and to help keep the budget in surplus.
That’s the micro-managing part of public accounting, where the dollars and cents are being watched very closely indeed. It’s the big-picture transactions in some of the state’s utilities that continue to give real cause for concern.
Full marks to Labor’s energy spokesman, Bill Johnston, for flushing out the government on the mess Verve Energy has made over the recommissioning of the old Muja A & B generating units at Collie. Far from the initial cost estimate of $100 million, to be borne by Verve’s joint venture partner, as noted in Political Perspective last week, the position has changed radically, for the worse.
Energy Minister Mike Nahan revealed, as he promised, that the cost is now north of $280 million, with most of the bills to be paid for by – you guessed it – taxpayers. The government says no more will be spent, but the horse has well and truly bolted.
While this was going on the government also announced that the Kwinana power station, which has been in operation, would shut down from October 2015. Stage C of the station will close rather than be refurbished at an estimated cost of $50 million to extend its operating life until 2020.
That’s right, rather than spend $50 million, the station will shut down with the loss of 100 jobs. That compares with a taxpayers’ bill of five times that figure for Muja A & B, which has resulted in two of the four units being brought into production on what has clearly been a dud deal.
Again it raises the question of where responsibility lies. Will the decision makers just retreat into the shadows until the issue dies away?
Mr Barnett has never been happy with the split of Western Power into four entities, and will be happier when Verve and Synergy are working effectively as one entity. But the Kwinana decision is another that requires full explanation.
Right now it appears questionable and costly decisions are being made about publicly owned power stations, and there’s no prize for guessing who picks up the tab. At the same time, promised concessions to business are scrapped to keep the budget in the black.
It doesn’t compute.