The recent Western Australian election can be interpreted, not unjustifiably, in two (not necessarily mutually exclusive) ways:
(a) the voting strength for the state Liberal and National Parties, reflected in an markedly increased representation by these two political outfits in the state legislative assembly, represents an endorsement by the public of a government which, relatively speaking, comes across as an economic safe pair of hands
(b) the voting strength for the state Liberal and National Parties represents a resounding disendorsement of the policies of the federal Labor Party, which is seen to assume counterproductive policy and political stances against the economic interests of a fast-growing, resources-intensive jurisdiction.
Much has been said already about (b), and I don’t propose to add to that discussion here. In terms of (a) there has been positive references made to the pro-development attitude of the Barnett government, for example its advocacy of the James Price Point gas hub, and some notable reforms promoting government school autonomy. The state government has also commendably maintained a (slender) budget surplus, something of a rarity within the Australian federation in recent times, undoubtedly assisted in part by an inflow of royalty revenues.
However, if there have been some murmerings of criticism they would relate to the government’s difficulties in controlling its expenditure growth as well as the rapid ratcheting up in the state public sector debt levels. The latter concern was the subject of a recent opinion piece, which appeared in The West Australian newspaper earlier this week - a transcript is available here.
The Barnett government has defended its borrowing program on the basis that the funds are being dedicated toward capital investments across the state. Most economists (a notable example which springs to my mind is James Buchanan) tend to agree that raising debts to finance infrastructure is not entirely unreasonable. However, taxpayers for many reasons have a right to assume a cautious stance even in this context, as this must-read blog post by American economist Keith Hennessey illustrates.
In simple terms, the political determination of investments are most likely to be far less efficient than similar investment choices made within the private sector. This would be, in no small part, due to the heightened risks of raising costs (and shift these to taxpayers) under a range of public sector major projects – think of the all the cost blow-outs affecting Victorian investment projects orchestrated under Labor which, I suspect, contributed to the demise of former Liberal Premier Ted Baillieu.
I am sure that Western Australians wouldn’t want to travel down the Victorian road in this regard, so any demands made by the good people in the west that the state government enact a plan for debt reduction would be very sensible indeed.