18/05/2015 - 09:52

The power of influence comes at a cost - SPECIAL REPORT

18/05/2015 - 09:52

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The ‘iron ore wars’ and budget battles are defining where power and influence lies in business and politics in WA. Read our latest Most Influential feature to see who is on the rise, whose influence is waning and who has dropped off the list.

The power  of influence comes at a cost - SPECIAL REPORT
Tony Abbott, Mike Nahan, Mathias Cormann and Colin Barnett together in Perth earlier this month. Photo: Attila Csaszar

The ‘iron ore wars’ and budget battles are defining where power and influence lies in business and politics in WA.

“When the power of the balance sheet ... meets the power of public office, the power of the balance sheet is no match.”

That’s how Fortescue Metals Group chairman Andrew Forrest summed up the struggle being waged between iron ore majors Rio Tinto and BHP Billiton and their growing number of critics, led by Mr Forrest himself.

In part, he is correct. When governments choose to act, it’s very hard for any business to stand in their way.

But it remains to be seen whether the state or federal governments will live up to Mr Forrest’s hope and act against the iron ore majors, despite the strident criticism and the planned launch of a parliamentary inquiry.

It was in October last year when Premier Colin Barnett first railed against the iron ore majors.

“This seeming strategy of the two major producers to flood the market and force the iron ore price down, I mean, remember who your landlord is, that’s hurting Western Australia,” Mr Barnett told a press conference at the time.

“While you are pursuing your business strategy, which I tend to think is flawed, you are actually hurting your host state.”

He repeated the same criticism last week, but that was on the way to explaining why it was not sensible or appropriate to have a parliamentary inquiry into the issue.

Treasurer Joe Hockey has also bought into the debate, expressing “a lot of sympathy for Andrew Forrest and all the workers in the sector”.

“Markets go up and markets go down,” Mr Hockey said.

“If there is untoward conduct it must be dealt with. We’ve been following this closely.”

Prime minister Tony Abbott took the issue to a new level on Friday, when he backed calls for a parliamentary inquiry.

"I think we do need to know the facts of what's going on here because I am conscious of the claims that are being made by Andrew Forrest and others," Mr Abbott said.

"I'm not in the business of demonising any company," he said, before going on to say "what we don't want to see is predator behaviour by any company".

"It is against the rules in Australia for businesses to engage in predator conduct like as some people allege is happening here and we'll make sure that the rules are enforced." 

All powerful words, but it's not clear what tangible action will follow.

The continuing debate over iron ore speaks volumes for Mr Forrest’s influence on politicians and public opinion.

Despite being a billionaire who is advocating policies that serve his own commercial interests, he presents as the ‘little guy’ taking on the multinationals.

Mr Forrest’s advocacy dovetails neatly with the fiscal problems facing the state and federal governments because of plunging iron ore royalties, which helps his cause.

Through all of this, the majors have been steadfast in pursuit of their long-term commercial strategy.

While they have postponed expensive ‘greenfields’ projects, they continue to ramp up production to maximise the value they get from the massive investments they have made over the past decade in the Pilbara.

Rio chief executive Sam Walsh has expressed sympathy for people losing their jobs, but is unrepentant.

“The industry is going through transition and during the transition it’s tough times,” Mr Walsh said.

BHP Iron Ore president Jimmy Wilson has gone in harder, through a staff email that went public.

He has effectively accused Fortescue of hypocrisy, describing it as “the world’s most prolific iron ore growth story”.

Canberra connection

The challenges facing Mr Barnett and Mr Forrest are in certain respects very similar.

Both racked up large debts during the good years and now find themselves under acute financial pressure.

WA lost its AAA credit rating, and Fortescue’s credit rating has also been chopped.

Mr Barnett’s fiscal problems have been compounded by the collapse in WA’s share of GST grants.

The power struggle over GST grants came to a head in Canberra last month, when Mr Barnett went in hard for WA with ‘right on his side’ but came up against the self interest of every other state premier.

The debate over GST grants also shone a light on the influence of Western Australians in Canberra, led by Finance Minister Mathias Cormann, Foreign Minister Julie Bishop and recently appointed Parliamentary Secretary to the Prime Minister, Christian Porter.

They were unable to deliver changes to the Grants Commission process but did help WA secure a one-off $500 million grant, with the promise of more to come next year.

But that came with a price, as Senator Cormann made clear.

“The treasurer and I are both on the public record as saying that we would like to see the Western Australian state government be a bit more ambitious and have a bit more of a sense of urgency when it comes to pursuing microeconomic reform,” he said earlier this month.

Senator Cormann specified more privatisation, abolition of the Potato Marketing Board and further deregulation of trading hours on his hit list. Lo and behold, that agenda is now being implemented.

Premier’s office

WA’s fiscal problems have left Mr Barnett a weakened premier who certainly does not dominate the state like in his first term of office.

His failure to achieve local council reform, and the recent controversy over closure of remote Aboriginal communities, illustrate some of the wider problems he faces.

But by virtue of his office, and his sway over cabinet, he remains the most influential person in WA.

In the premier’s office, there have been two notable departures this year, with chief of staff Brian Pontifex taking a federal government posting in Paris, and resources adviser Geoff Wedgwood joining listed company Mineral Resources.

New chief of staff Willie Rowe, who started this month, brings a diverse background to the premier’s office.

Prior to accepting his new job, Mr Rowe ran lobbying firm Third House and was president of the Australian Federation of Aids Organisations and chairman of ScreenWest.

Amid these changes, the premier’s closest adviser is considered to be the low-profile director of government strategy Narelle Cant, who was an adviser to Mr Barnett in the Court government and has been with him since he was elected premier.

Another trusted confidante is special adviser John Hammond, who came out of semi-retirement when Mr Barnett was elected premier.

A third key individual is department of premier and cabinet director-general Peter Conran.

He was recruited from Canberra after Mr Barnett won office, and was reappointed for a second five-year term in 2013.

The ministry

Mike Nahan has become an increasingly powerful figure in both his treasury and energy portfolios.

On the budget front, he has managed to rein in the growth of government spending, something that evaded his predecessors Troy Buswell and Christian Porter.

He is also making surprisingly rapid strides with his pro-reform agenda, helped greatly by the recent GST deal with Canberra.

In the energy portfolio, Dr Nahan appears to be playing a long game, setting up the sector for reforms the premier has long opposed.

This was highlighted by the appointment of Lyndon Rowe – a long-time advocate of pro-market reforms, including the creation of competing ‘gentailers’ – as executive chairman of Synergy.

Dr Nahan’s rising influence means his chief of staff, Simon Helm, who previously worked in the premier’s office, is an increasingly important figure.

Elsewhere in the ministry, John Day has been quietly effective in planning while Liza Harvey continues to impress as police minister.

Nationals WA leader Terry Redman has differed publicly with the premier but is nonetheless seen as increasingly influential, based on his performance as a minister.

Ministers like Bill Marmion, Michael Mischin and Joe Francis are solid contributors.

Deputy Premier Kim Hames’ political stocks have waned; he plans to retire at the next election, and has been forced to deal with a succession of problems in the health portfolio.

Transport Minister Dean Nalder is slowly rebuilding his political capital, after embarrassing the government and being stripped of the finance portfolio last December, over a number of real and perceived conflicts of interest.

Big business

Away from the hurly burly of daily politics, a handful of very large businesses continue to have a big impact on WA.

When companies such as Wesfarmers, Woodside, Chevron and BHP make business decisions, whether investing in new projects or slashing operating costs, the impact is felt widely.

That makes the leaders of those companies highly influential.

It’s notable that, later this year, Michael Chaney will become chairman of the state’s two largest home-grown companies – Wesfarmers and Woodside.

Combined with his political connections, that makes him especially influential, as is Wesfarmers managing director Richard Goyder.

ACROSS IT: Richard Goyder leads the diverse Wesfarmers group. Photo: Attila Csaszar

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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