01/03/2017 - 12:21

Promising a day of financial reckoning

01/03/2017 - 12:21


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ANALYSIS: The major parties are ramping up expectations of what they will deliver if they win the March 11 state poll, but financial realities have a way of stifling the best of intentions.

Promising a day of financial reckoning
Labor has committed to extend the Joondalup rail line to Yanchep. Photo: Attila Csaszar

ANALYSIS: The major parties are ramping up expectations of what they will deliver if they win the March 11 state poll, but financial realities have a way of stifling the best of intentions.

Election campaigns are all about winning over the undecided, the swinging voters among us, with the major political parties aiming at the hip pocket nerve as voters ask what’s in it for them.

However, this time around, as we near the state poll on March 11, voters would be wise to treat the sweeteners thrown their way with a dash of scepticism, because there is not much money around.

We know this because Premier Colin Barnett and his treasurer, Mike Nahan, have been saying it for some time. The concerted campaign for a better deal on the GST redistribution has been a recurring theme. Billions of dollars are involved.

The parlous state of Western Australia’s finances provides the basis for Nationals WA leader Brendon Grylls’ crazy-brave push for a steep increase in payments from Rio Tinto and BHP Billiton on each tonne of ore mined. It is crazy-brave because his campaign has attracted a full-frontal response from the mining lobby, which has spent $2 million to defeat the proposal. Television, newspaper and radio advertisements over the next few weeks could significantly increase that figure.

The major parties have already committed to promises amounting to more than $9 billion, at a time when the state is running record budget deficits and state debt. Labor leads the way.

A curious feature of the campaign has been that, when one side produces a major promise, the other immediately questions how it will be paid for.

Labor’s big-ticket item is the $2.5 billion-plus Metronet rail project, which is designed to be a major vote winner.

In early February, Transport Minister Bill Marmion went on the attack over how Labor would pay for it.

“Labor can’t transfer Perth Freight Link (PFL) funds, as the federal government has made it very clear these funds can’t be transferred,” Mr Marmion said.

“Is it relying on rubbery land sales, or developer levy and value capture revenues, which we know they won’t achieve?

“Labor’s commitment to extend the Joondalup rail line to Yanchep is underfunded by $200 million, based on costings provided by the Department of Transport. The state government estimates that project will cost between $580 million and $600 million, not $380 million as Labor claims.”

As we know from Prime Minister Malcolm Turnbull’s recent visit to Perth, Labor leader Mark McGowan’s plan to cancel the PFL project and redirect the Commonwealth’s $1.2 billion contribution to other areas doesn’t cut the mustard with the PM. The proposal to redirect more than $400 million of this money into the Metronet project, for example, won’t happen, according to the PM, confirming Mr Marmion’s comments.

Mr Turnbull said the money was allocated according to recommendations by Infrastructure Australia, which was outside the responsibility of state governments.

If Labor’s predicament sounds familiar, that’s because it mirrors events in 2013, but this time the boot is on the other foot.

In 2013, Mr Barnett promised that a re-elected government would build Max Light rail to connect the northern suburbs from Mirrabooka to the city. There were also plans to provide links to the University of WA and Curtin University.

There was only one snag. In campaigning for the election of a federal coalition government led by Tony Abbott, Mr Barnett omitted to gain a public assurance that the aspiring Liberal PM would make a sizeable contribution.

In fact, after being elected Mr Abbott, as was his wont, revealed that subsidising new urban rail projects wasn’t his bag. He loved roads, so without a Commonwealth contribution, the Max project was shelved; and that is where it has stayed.

The debate over where the money is coming from hasn’t been one sided.

Shadow treasurer Ben Wyatt, after being roundly criticised for his ‘creative’ approach to cutting state debt (with a combination of royalties money and increased GST reimbursements) went on the attack over the Liberal plan for stamp duty concessions for seniors who want to downsize their accommodation.

The plan is to free-up the family home so that the owners can move into smaller accommodation, enabling the property to be sold to younger, and possibly expanding, families.

Mr Wyatt described it as another debt-funded promise to buy votes.

“Any promise by the Liberals just cannot be believed after their track record of broken promises,” he said.

“The Liberals’ plan to borrow more money to pay for stamp duty concessions for seniors isn’t credible.”

Newly elected governments used to have a ready made alibi for putting a brake on fulfilling election campaign promises.

Having won power, there was always the first briefing with Treasury officials, followed by the announcement: ‘We knew the financial position was a problem, but the cupboard is bare. Consequently we will have to rethink our election promises.’

This was often used as an excuse to increase taxes and charges. Labor’s Brian Burke resorted to this approach after winning government in 1983, with a twist – senior public servants and judges, as well as MPs, had to endure a temporary 10 per cent pay cut because the books, according to Mr Burke, were in such poor shape.

How do treasurers, the politicians who are publicly answerable for the state of the books, react to this approach? Not too well, if an admission by former federal Labor treasurer and Fremantle MHR, John Dawkins, is any guide.

Mr Dawkins told me in 2013 that the two most difficult budgets a treasurer had to deal with were the one before an election, and the one immediately after. The pre-election budget was tough because all his ministerial colleagues were at him for concessions (read potential vote winners) to be approved for their areas. If successful, the relevant ministers would beat their chests as if they were heroes.

It was a different story after the election. If returned, the government had to face the facts; and horrified Treasury officials explained there just wasn’t enough money to do everything that was promised. So the government had to level with voters – better to do it sooner than later.

“I recall after one election we broke our first promise within two weeks,” Mr Dawkins said.

The introduction of the WA Treasury’s Pre-election Financial Projections Statement, which outlines the position at the start of the campaign, provides a reality check. This year, it confirmed the state is in the red.

However, the promises keep coming. There is a $104 million package for the Kimberley (Labor) here, and a $75 million incentive scheme to employ more apprentices (Liberal) there.

Another day, more ‘commitments’.

Post election, which one will be the first to be broken?


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