05/11/2008 - 22:00

Small is sometimes better

05/11/2008 - 22:00


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AS someone who prefers small perfectly formed objects as opposed to monolithic structures, when it comes to business, the government's decision to carve up two Labor-created super departments is something I'd generally welcome.

AS someone who prefers small perfectly formed objects as opposed to monolithic structures, when it comes to business, the government's decision to carve up two Labor-created super departments is something I'd generally welcome.

Last week, Premier Colin Barnett announced that the Department of Industry and Resources and the Department of Consumer and Employment Protection would disappear early next year.

The two departments will be reconstituted as three: the Department of Mines and Petroleum, Department of State Development and the Department of Commerce.

Clearly the previous amalgamation of departments to form DoIR had not worked for business, with so much ranting about the approvals process getting stuck in that organisation.

As the mining boom unravels it certainly seems the state might have been better served with a specialist department to shepherd through major developments - such as Inpex, Oakajee and the Ord River expansion.

The time taken to deal with these proposals means there's every possibility they could all fall through if a special effort isn't made to save them.

In fact, many think Oakajee is the only one of the three that has any prospect of occurring, and that presumes more mid west miners and their partners don't take a further battering from the markets.

At more mundane resources levels, a focused department that has a knowledge bank stored within it also makes sense to me.

Some might argue that, when it comes to approvals, small is not necessarily better because it increases the number of departments a company must visit to get a project passed.

New Mines and Petroleum Minister Norman Moore doesn't seem to think so. Mr Moore argues the opposite, that smaller departments can be encouraged to talk between themselves to get things done.

To some extent this could be true. With distinct lines of demarcation, it may be more obvious where the blame lies in delays than if a matter is simply lost somewhere in a giant machine.

Only time will tell; and there isn't much of that.

The only major issue I have with this move is the timing. While I do understand governments need to get on with things and make sure that is happening quickly, the move to shake up a large part of the bureaucracy in such economic times is unfortunate.

Due to Mr Barnett's sudden arrival as opposition leader and the drawn out election process, there was little chance to get this policy ironed out and then implemented in good speed.

Combined with global turmoil, that has left a lot of doubt and uncertainty in the public service - which is not helpful if you want to get things done.

Bigger is not better

While I can cope with the rationale of splitting big departments, I have a lot more concern with any proposal to merge power producer Verve Energy with retailer Synergy.

The losses Verve was making post-disaggregation might have made a great whipping post for the Liberals in opposition, but most of those were simply hidden from view in the previous form of Western Power as a state electricity monopoly.

Right now, the market can only benefit from more competitive tension at every level.

Remarrying a producer with a retailer would scare many who were thinking of investing in power generation and would probably be relying on Synergy as their reseller.

They won't want to subsidise inefficient, old generation.

The federal Liberals failed, in my view, when they left Telstra intact and didn't dismember it.

Australia has suffered from that vested interest - and I own shares in Telstra - dominating the market at all levels for its own benefit.

Around the world there are countless examples of governments using regulation to split vertically-integrated monopolists who have too much market power.

It is simply not in the interest of consumers to allow market power.

If that is the case for corporates, where at least the profit motivation is understood, then it is even more so for state-owned entities, which are more likely to be prompted to act for other reasons less obvious to the public.

There was too much smoke and mirrors in the old Western Power. We are much better off with transparency, even if that shows the losses that dinosaur generators make.

Of course, if you want to avoid losses, start charging all consumers real prices for energy.

That is the only way to clear up the legacy of out-dated generation and stimulate new entrants to the market.


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