25/05/2011 - 10:30

WA blazing trail of fiscal independence

25/05/2011 - 10:30


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Political secession is not on WA's agenda, but financial secession certainly appears to be happening.

Political secession is not on WA's agenda, but financial secession certainly appears to be happening.

That's the only conclusion that can be drawn from the increasingly bitter war of words which have broken out between Perth and Canberra.

While most comments so far about the WA Government's decision to increase iron ore royalties have focused on the timing of who said what to whom, the deeper message is that the WA Government is prepared to bear the cost, whatever it might be.

In effect, WA is turning its back on eastern Australia and flagging a future which is intimately connected to China, Japan, and South East Asia.

To anyone who has watched the evolution of the state over the past 50 years there is nothing new in this development. It has been a growing trend which only becomes obvious during times of rapid resource development, such as the boom currently underway.

The shock, and it will be a big one when it registers, will be felt in Sydney, Melbourne and Canberra, when politicians in those cities realise that Australia's western third is waving a fond farewell and only wants to do business with the rest of the world.

WA Premier, Colin Barnett, came awfully close to that yesterday when commenting on a threat to cut WA's share of revenue from the goods and services tax to 33 per cent of money collected, when it was originally promised to be 100 per cent.

"If it falls down to 33c as the Treasurer and state Treasury are predicting the relationship between Canberra and WA becomes secondary to other relationships," Barnett was quoted as saying.

"Our links with South East Asia, China and Japan actually become more important to us than our links with Canberra."

If this sounds far-fetched then you have not recognised what's happening as a financial disconnection between the east and the west reaches new heights.

Right now the game is all about name calling. As Asia demands more resources WA will become a political lightning rod, and while it is popular to see the west as a region inhabited by eccentric miners and farmers a great awakening is on the way.

The rough numbers look like this. WA has 10 per cent of Australia's population, which represents minimal political clout in Canberra. But, it accounts for a third of the country's export income, which is a significant contribution - and it's getting bigger as expansion of the iron ore and natural gas industries accelerates.

At some time in the near future a classic "tipping point" will be reached. Whether it is 40 per cent of national export income, or has to rise to 50 per cent, the point is that WA is rapidly heading to a stage of financial independence.

Dealing with WA, as federal treasurer, Wayne Swan, discovered over the past week, is becoming a nightmare. WA has become the state he can't tolerate on a personal level, but can't do without on a budget level.

Barnett, knows this better than most. In his time as chief executive of the WA Chamber of Commerce, he saw how his mentor, then Premier, Sir Charles Court, repeatedly thumbed his nose at Canberra and bulldozed through massive resource developments.

It was the late Sir Charles who showed how to negotiate resource development agreements between WA and the rest of the world. In fact, in his government there was even a minister for foreign relations, something totally unheard in current state governments.

Over time, and if Swan really wants to punish WA for being successful, Canberra might cut the state's share of revenue from the goods and services tax to zero if the boom continues.

But, if that happens it will simply prove one thing - that WA knows how to run its own affairs and how to be a winner, and it will not take long for the rest of the country to figure out who's being the schoolyard bully, and mete out punishment in the ballot box.

Leaving politics out of this grand go-it-alone approach by WA there is a marvellous private sector example of what it means to own a business without having control.

The late Robert Holmes a Court once bought a majority position in the non-voting shares of London's Associated Communications Corporation. It was a move regarded as eccentric, with no-one understanding why he would buy non-voting shares, leaving control of the voting shares with Lew (Lord) Grade.

"Lord Grade might have voting control," Holmes a Court said. "But I own the business".

History is on its way to repeating itself in WA v Canberra.


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