03/02/2011 - 00:00

WA needs to stay a step ahead

03/02/2011 - 00:00

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The Barnett government’s decision not to attend a recent trade showcase in the US sends the wrong message.

WA needs to stay a step ahead

WHAT was Brendon Grylls thinking when he initially defied an order to release details of correspondence with the flamboyant Queensland industrialist Clive Palmer over a new development in the Pilbara?

It wasn’t a good look, especially as Mr Palmer also effectively bankrolls Mr Grylls’ National Party.

It didn’t get any better for the government when the premier, Colin Barnett, backed his youthful minister, who had thumbed his nose at the order by the Freedom of Information commissioner.

Fortunately for the government, Mr Grylls had a change of heart and handed over the documents, which had been requested by Labor frontbencher Mark McGowan.

“Unfortunately for Mr McGowan there is not a skerrick of information in the documents that support his wild accusations of impropriety,” Mr Grylls said.

Which begs the question why weren’t they released more promptly?

The whole episode smacked of a rerun of the 1980s when Labor regularly used the cloak of ‘commercial confidentiality’ to hide dealings with its major donors.

It’s a further sign that Mr Barnett and his Liberal-National alliance are on the cusp of submitting to an affliction suffered by many governments that become comfortable in office – complacency.

The premier and his team might be riding high in the polls, and the Labor opposition resemble a headless chook after the shambolic challenge to Eric Ripper’s leadership, but when the Grylls-McGowan row is added to an earlier government decision to bypass the recent Australia Week trade showcase in the US, there are clear signs of the early stages of hubris. Given the trends in international trade in the commodities that underpin Western Australia’s economic strength, and the hesitancy in the global economic recovery, that smugness could eventually backfire.

The annual trade showcase runs in eight US cities and promotes a range of Australia’s strengths, from business to tourism.

There has been a feeling within state governments over the years that WA is a bit of an afterthought at overseas promotions run by Austrade. A belief that, far from being acknowledged as an economic powerhouse, WA is seen as an ‘add on’ when Australia’s attractions are being extolled to potential foreign investors and customers.

If that was a factor in the recent no show, it proved a poorly researched decision. Especially when WA-born television presenter Rove McManus was the host at a gala ball for the occasion in Los Angeles, and drew attention to the local absence.

Mr Barnett defended the decision, saying he preferred to concentrate on countries in our region, and that the US market was “primarily east coast focused”. He added that major US oil and gas companies already have a significant presence in Perth, and the lines of communication are good.

That’s probably true, but hardly an adequate explanation for snubbing what is something of a showpiece promotion with a major trading partner, when the state should be exploiting every possible business opportunity.

According to Access Economics, WA’s immediate outlook is good.

“Resource boom mark II will be even bigger than mark I was from 2006 to 2008 for Western Australia,” it said optimistically. But there was also a sting.

“However, with international migration now falling instead of rising, the state risks even bigger skills shortages and price and cost pressures than it saw last time around.”

The cost pressures promise to be across the board. But they have already surfaced in a most public way for potential workers. The Karratha suburb of Nickol now has the dubious honour of becoming Australia’s first non-metropolitan area with a median house price topping $1 million. Hardly a feat to attract new workers and their families, despite the well paid jobs.

But there are other reasons why resting on the oars in a dynamic world is dangerous.

Ten years ago, WA had an Australian monopoly on LNG, producing 12 million tonnes from three processing trains on the Burrup Peninsula. Today, that has increased to five trains with an output of almost 20mt.

The Pluto project comes into production later this year with nearly 4mt from one train, and Gorgon is due to produce a further 8mt from two trains in 2015. Both projects can be expanded, and there are high hopes for the Browse project eventually operating from James Price Point in the west Kimberley.

But there will also be billions of dollars in new investment in LNG projects operating out of Darwin, including the Inpex venture, which slipped though WA’s fingers. As well, Queensland is getting into the act with cutting-edge technology to produce LNG from coal seam methane.

The risk for WA is that the development of offshore platforms for LNG, linked with Darwin, and the coal seam methane from Queensland will not only capture the imagination of workers but also investors. It could be to WA’s cost in both cases.

And while investment in the iron ore industry is strong, the Minerals Council of Australia has warned that Australia’s share of mineral exports has slipped over the past five years.

Understandably, the major miners in the Pilbara have concentrated on high-grade ore. It’s more valuable and requires less processing. But many of the new miners are now seeking to exploit the lower grade deposits where the returns are more marginal. Hence their furious opposition to Labor’s ham-fisted original super profits tax.

That doesn’t mean billions of dollars won’t continue to pour into the industry, with spin-off benefits across the state’s economy. What it does mean is that with increasing competition for resource investment from other states, as well as the African nations and Brazil, WA has to make every post a winner.

That’s why ducking the Australia Week trade showcase in the US made no sense. It sent the wrong message.

Mr Barnett says WA’s economic future is tied up more with our northern neighbours rather than “over east”. And if WA business plays its cards correctly he’s almost certain to be proved right.

But given the likelihood of another $1 billion state budget surplus, the cost of taking part in the US promotion would have been a financial fleabite.

The economic message is that every state and nation has to run faster just to maintain its position. No-one knows how long the good times will last.

Labor might be floundering but that’s no excuse for Mr Barnett and his ministers to rest easy. The challenge is to nail down new projects over the next two years in an increasingly fierce marketplace to shore up local jobs and living standards.

Voters expect nothing less.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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