26/05/2011 - 00:00

Pressure on as Barnett plays ‘risk-reward’

26/05/2011 - 00:00


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LAST week’s standoff between the federal and state governments over mining royalties overshadowed the news from Shell that it had given the green light to its $11 billion Prelude floating LNG project.

Pressure on as Barnett plays ‘risk-reward’

LAST week’s standoff between the federal and state governments over mining royalties overshadowed the news from Shell that it had given the green light to its $11 billion Prelude floating LNG project.

Resources Minister Martin Ferguson and Western Australian Premier Colin Barnett bookended two key players from Shell – board member Malcolm Brinded and increasingly prominent Australian chair Ann Pickard – at the announcement.

The body language between the two politicians was reportedly very uncomfortable and the pair had separate doorstops with the media after the official event, signalling the brief break in hostilities was over.

With Labor decimated in WA at the federal level and Mr Barnett happy to play the states’ rights card, there is little joy here for those who represent Canberra.

In terms of influence, both Stephen Smith and Chris Evans have been moved to portfolios that were, at best, sideways moves in the reshuffles that occurred once Julia Gillard became prime minister. To accommodate the deposed former PM Kevin Rudd, Mr Smith was shifted from foreign affairs to become defence minister, while Senator Evans lost the immigration portfolio to become minister for tertiary education, skills, jobs and workplace relations.

While Senator Evans’ role could, arguably, be vital to WA as the state enters another skills squeeze, there is no doubt his profile is vastly diminished these days.

That leaves, as special minister for state, Gary Gray, who is known to revel in the role of Mr Fix-it. Mr Gray was influential in the last government’s moves to protect northern Australia from development but has been relatively low-key on issues in the Kimberley such as the Ord expansion and the James Price Point LNG hub.

Nevertheless, he is seen as a practical player who can sense the political winds on issues of importance.

Arguably, the key federal politicians for industry in WA are Treasurer Wayne Swan, who has embarked on a crusade to tax the state’s key industry, and Mr Ferguson, the minister charged with making that palatable. Notably, neither is from WA.

Mr Ferguson is highly regarded in the resources sector as a no-nonsense politician who can get things done. However, his relationship with the industry was severely tested by the surprise announcement of the Resource Super Profits Tax by Mr Swan a year ago.

Many still resent the Minerals Resource Rent Tax compromise deal, which was stitched up with three major companies – Rio Tinto, BHP Billiton and Xstrata.

Arguably, that surprise tax move cost Mr Rudd the prime ministership and nearly lost Labor power after just one term. It was certainly one of the reasons why the conservative parties gained an even stronger footing in the west at last year’s election.

The tax remains pivotal in the politics of WA and Mr Barnett is taking the opportunity to exploit that.

Last week, his government’s budget lifted the royalty rate on iron ore fines, a variety of ore traditionally seen as a poor cousin to lump, a coarser version. The royalty increase, set to raise about $2 billion over four years, was well flagged to the public and industry since Mr Barnett won government and is seen as removing a subsidy on this product now that it has become popular with customers.

Mr Barnett has argued he needs the royalties to make up for the ever-sliding share of GST WA receives.

Unfortunately for Mr Swan, the royalty rise is expected to impact on his projected MRRT revenue and may well hinder federal Labor’s ability to deliver a much-promised surplus in this term of government.

While Canberra-bashing’s popularity in the electorate increases in proportion to the voters’ distance from the national capital, there is still some doubt about the strength of Mr Barnett’s hand in this battle.

The upside is his message is simple, while Mr Swan will have some difficulty explaining the complexity of the GST and the Commonwealth Grants Commission process, which allocates its funds to the states.

But with the conservatives dominating the WA landscape, Mr Barnett needs to be wary that federal Labor may have little to lose in treating the state as a pariah.



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