10/03/2017 - 14:25

Summit would signal a fresh start

10/03/2017 - 14:25

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OPINION: Reducing state debt will be a top priority for the new government and perhaps, as a former PM has suggested, a more cooperative approach is needed.

The sale of Western Power formed a big part of the Liberals’ debt reduction strategy before the election. Photo: Attila Csaszar

OPINION: Reducing state debt will be a top priority for the new government and perhaps, as a former PM has suggested, a more cooperative approach is needed.

Bob Hawke didn’t earn the accolade of being one of Australia’s best prime ministers for nothing. He had many very good ideas, a number of which were implemented.

One was the early decision in 1983 to hold a widely representative summit in Canberra so that the key players in the national economy, including business and union leaders (who had been at each others’ throats) could see how the country was travelling and consider what changes should be made.

Mr Hawke called it consensus. It was unprecedented, but it worked. Unions and employers even adopted a widely successful strategy on wages and conditions called the Prices and Incomes Accord.

Serious consideration, then, needs to be given to the former PM’s recommendation that a Perth summit be held to unite business, unions and the community to map out a strategy to revive Western Australia’s economic growth and get the budget back into the black.

It is a serious issue for the new government. And neither the Liberal nor Labor parties came up with convincing solutions during the campaign. Nor did they focus much attention on the other side’s flaws, possibly because they did not want reciprocal attention on their own shortcomings.

The Liberals’ plan for paying down debt and funding infrastructure revolved around the sale of Western Power for a notional $11 billion. This would cut debt by $8 billion and leave $3 billion for capital works.

It is great plan on paper, but with a serious flaw. The Liberal-Pauline Hanson One Nation preference deal will help the Hanson party win seats in the upper house and possibly the balance of power. And the party is dead set against the Western Power sale.

Labor’s wasn’t much better.

Mark McGowan is committed to stopping the extension of Roe Highway through the Beeliar Wetlands. That will free up $1.2 billion of federal money, which he wants to reallocate. But federal Finance Minister Mathias Cormann has other ideas, saying Canberra will decide what happens to the money, not Mr McGowan.

Labor also has a convoluted formula to pay down debt, based on high iron ore prices and an increasing proportion of the GST revenue being returned to WA. I initially gave Labor credit for addressing the debt issue. However, on closer inspection, the potential effectiveness of this imaginative approach is dubious at best.

So the government’s choice over the next four years is clear. We can either continue to live high on the hog and defer the moment of truth, or tighten the belt a couple of notches in the hope that revenue from royalties and the GST will eventually bounce back.

No amount of finger pointing will solve the problem. Voters deserve action; the last thing they want is for a new government to play the blame game.

In 2001, then new Labor treasurer Eric Ripper referred ad nauseam to ‘Barnett’s black hole’ when highlighting the state of the finances, following Labor’s win over the Court-Cowan coalition government in 2001. Mr Ripper later presided over record budget surpluses, thanks to a booming property market and strong GST revenue.

It is true that Colin Barnett contributed to the current financial problems. Overgenerous pay increases to teachers and nurses, agreed to during election campaigns to ‘buy’ industrial peace, placed ongoing strain on recurrent spending. Some capital works projects should have been deferred, although Mr Barnett is adamant the state will get a dividend from assets such as the Perth Stadium and Elizabeth Quay.

And more money should have been put aside for what the Treasury calls the ‘rainy day fund’.

But a reminder, who is critical these days of the major cost overruns in building the Perth Arena (a Labor initiative)? The cost increases reflected appalling oversight of the centre’s construction, but it is now a major asset with spin-off benefits across the board.

What is undeniable is that WA has effectively been in election campaign mode since mid-December. It is now time to confront the state’s challenges, and Mr Hawke’s idea of a summit would seem to be a good start.

However, another of his ideas, the abolition of the states, is unlikely to be on the agenda.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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