24/10/2014 - 05:49

The birth of WA Inc, and FIFO

24/10/2014 - 05:49

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In the first of four extracts from Peter Kennedy’s recently released book, Tales from Boom Town, the author looks at the first WA Inc deal and the introduction of fly in, fly out mining in WA.

The birth of WA Inc, and FIFO

Brian Burke’s links with business developed through his novel approach to strengthen his Labor government’s financial base.

He wanted to tap into a new revenue stream to help in the delivery of traditional government services, and at the same time ease the burden on taxpayers.

An early opportunity emerged soon after he became premier in February 1983. He received an approach from the interests developing the Argyle Diamonds deposit in the Kimberley. He was told the developers had an undertaking from the previous government that the obligation to build a town would be waived after the 1983 election if the coalition were returned.

After consideration, Burke said he had no problem waiving the commitment to a town provided the government was compensated for the benefit it would have received if the plan had gone ahead. He said the treasury had looked at it and the figure had been set at $58 million. 

Senior O’Connor government minister Peter Jones said an approach had been made in 1982 to waive the undertaking to build a town, but it was rejected.

Burke said he was aware Alan Bond had a company called Northern Mining, which owned 5 per cent of Argyle, and that Laurie Connell, whom he had met after the election, had done some work for Bond.

“I rang Connell and asked him if he would see whether Bond was prepared to sell his stake,” Burke said. “Eventually we got the money out of Argyle (for not building the town), used the money to buy the 5 per cent interest owned by Northern Mining (for $42 million) and then … floated the Argyle Diamond Trust. We got all our money back and kept 5 million shares and a seat on the board. And that showed me it (revenue raising) can be done.

“So it started from there and WA Government Holdings, the WA Development Corporation and EXIM flowed from that.”

(The WA Inc Royal Commission was later told Burke had known Connell was advising both Bond and the government on the Argyle deal, but did not tell his cabinet. It described such conduct as “grossly improper”.)

Burke outlined his strategy to work more closely with the private sector at an early meeting with senior federal Labor MPs who had been appointed ministers in the Hawke government. Fremantle MHR John Dawkins, who was at the meeting, recalled the euphoria that followed the Burke election victory spilling over to the federal result in which Labor also made significant gains in WA.

“Burkie asked us to a meeting in his office,” Dawkins said. “Peter Walsh (later finance minister) was there and I think Kim Beazley (then aviation minister) as well. He gave us a sob story that there was no money and, because of that, he would have to become a state capitalist.

“He rattled off all this stuff about the Argyle diamond operation, which he subsequently carried out. He said the state would have to make money by going into business, and he mentioned the diamond mine and possible real estate ventures.

“Walshie and I looked at each other, shook our heads and thought ‘this is going to cause trouble’. Burkie wanted regular meetings with us to help ensure WA got the best possible financial deal from the feds.

“But it was the one and only meeting. We thought the (state capitalist) idea was fraught with danger, as it turned out to be.”

But Burke succeeded in attracting some of Perth’s leading businessmen to become involved. They included Sir James McCusker (father of the former governor) from the Town and Country Building Society, Jim Horwood, vice-president of the Confederation of WA Industry, John Roberts who owned Multiplex, Dennis Cullity from Westralian Forest Industries, Bernie Prindiville with strong business links in the Catholic community, senior lawyer Robert Blanckensee, and company director John Horgan.

“I don’t remember too many business people being stand-offish,” Burke said. “I don’t remember anyone in those times being negative about what I was trying to do. There was some criticism but it was very muted.”

But there were murmurings. And not just from Dawkins or business sources. Deputy premier Malcolm Bryce said he was on his first overseas visit to Japan and South Korea to display the new government’s credentials to the state’s trading partners when the cabinet agreed to relieve Argyle of the obligation to build a town.

He sees the decision as Australia’s introduction to the fly in, fly out phenomenon, and he has grave doubts about the merits of the move.

“Apart from being somebody utterly committed all his life to the economic development of communities, and the formation of new communities, I have serious concerns about the impact on young people who are actually involved,” Bryce said. “I understand what the upside is, but I am becoming increasingly aware of the downsides. The social implications are pretty ugly.”

 

• Tales from Boom Town by Peter Kennedy. UWA Publishing. RRP $29.95.

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