The ‘rainy day’ has arrived, and a former WA treasurer is calling on the McGowan government to do more.
The ‘rainy day’ has arrived, and a former WA treasurer is calling on the McGowan government to do more.
Former Labor treasurer Eric Ripper is urging the McGowan government to inject significant spending into the health and small business sectors to help counter the adverse impact of the COVID-19 crisis.
His call comes as Treasurer Ben Wyatt’s concerted effort to control spending, after inheriting a record budget deficit three years ago, appears certain to deliver a multi-billion-dollar surplus this financial year.
Mr Wyatt and his ministerial colleagues have generally held the line on government finances, including persisting with a tough approach to pay increases for public sector workers, which has so enraged the WA Police Union.
With one notable exception, the government has held firm on spending. And in the first half of March, proof emerged that this approach had borne fruit.
The Treasury’s latest ‘Quarterly Financial Results Report’ confirmed that an operating surplus of $2.3 billion was recorded for the first half of the financial year, compared with just $83 million last year; a remarkable turnaround.
And it predicted, before the coronavirus fallout began to bite, that the surplus for the full year would be $2.6 billion, almost double last year’s result.
So Mr Wyatt’s attempt to build a rainy day fund, to be used when it would be most needed rather than splashed on borderline projects, appears to have worked. In fact he has already flagged that household charges will be frozen, well in advance of the state election in March next year.
Further proof that the economy was coming good was contained in the employment figures for February released by the Australian Bureau of Statistics. They showed that Western Australia’s unemployment rate had dropped by 0.5 points to 5.2 per cent, the third best in the country and marginally above the national average of 5.1 per cent.
It was a buoyant premier, Mark McGowan, who told parliament this meant 10,900 more workers had been added in WA. He did note, however, that given the grim news starting to emerge thanks to COVID-19 it was likely to be the high-water mark for the year.
So how much room does a state government have to shore-up the economy and complement the big spending programs the federal government has already announced, with the likelihood of more to come?
Mr McGowan and Mr Wyatt have committed to an initial $607 million package to assist struggling households and small business. But according to Mr Ripper, who presided over several record surplus budgets under premiers Geoff Gallop and Alan Carpenter, there is plenty of scope to spend in key areas.
Mr Ripper said that, as treasurer, he had been under intense pressure to give back through tax cuts and extra spending. At that time, though, the WA economy had been at full capacity, with unemployment at 2.8 per cent in August 2008.
Drawing on his experience acquired in the delivery of eight budgets, he added: “So we saved the cash for a rainy day, which did come (albeit briefly) in 2009 on (former Liberal premier) Colin Barnett’s watch, and also to build Fiona Stanley Hospital.
“Today we face a frightening health and economic crisis. I would be throwing a bucketload of money at health to increase intensive care and COVID-19 testing and tracing capacity.
“And also use the budget to assist small business and casual and stood-down workers, so far as the state can. This is why you aim for strong finances, so you can deploy them when necessary. Try to spend wisely, but don’t worry about the (budget) surplus this year.”
The ‘budget surplus’ reference has special significance. Prime Minister Scott Morrison and Treasurer Josh Frydenberg had been desperate to deliver the first federal surplus in years, and everything appeared to be on track, until COVID-19.
A surplus would have given the Liberals significant bragging rights over Labor. But now they must bide their time: the economy, and the health of Australians, have precedence.
The same applies at the state level, which makes the McGowan government’s decision to move 600 privatised jobs at Fiona Stanley Hospital to the public sector at a cost of $21 million in the first year, without creating one extra job, even more irresponsible.
