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.
They ran dead on IR reform as well, according to a paper delivered to the H R Nicholls Society in Melbourne a couple of years ago. Good recommendations were offered to improve the State legislation and for a short time there was a hope of progress when Buswell held the portfolio but then it passed to some non-entity who apparently had no idea of the issues involved. No news since.
Rafe, it is indeed a great tragedy that the states ran dead on the centralisation of IR regulation. It defies any sense that a centralised, nation-wide system can effectually cater for the divergent economic and business conditions found across, and within, states. This is especially a problem for smaller states that need competitive cost conditions to attract entrepreneurs and encourage business formation.
Remember also that WA is being stiffed by Canberra. By 2015 WA will be getting only one quarter of GST revenue back that Western Australians have paid.
Hard to do a budget when the ALP steals their revenue to give to fleckless Tasmanians.
Wonder why there’re rumblings about seceding? I recall there once was a harbour party in Boston over similar injustices.
Yes the archaic system of fiscal equalisation does leave WA shortchanged. This aspect of fiscal federalism does need reforming (I favour outright decentralisation of taxes as a first-best move, or redistribution of GST to states on the basis of consumption within states as the second-best; under both scenarios the CGC would be gone).
Imagine what would have transpired had the authorities did the honourable thing and accepted the WA secession referendum outcome of the early 1930s? One could speculate that Westralia might well be a true global economic powerhouse, and that Australia an economically freer place to live in without as much royalty revenues to splurge upon value-destructive purposes.
Perhaps a simple limit like 80% would be prudent.
I don’t think seceding is sensible, but then ripping people off can make them less sensible than usual. Diplomacy and good government are about avoid these situations before they arise.
BTW, I’m in NSW not WA.
As James Buchanan once said, secession has to be a viable option to ultimately ensure that political preferences are made to more closely align with citizen preferences. For this reason, and others, I’m all for it.
Thanks Julie, I had not come across Hennessy.
I’s good stuff and I have added it to my reader.
So many blogs, so little time.
The amount of debt the Barnett government has taken on does worry me, but I reckon also that funding infrastructure is hard to do out of general revenue — particularly in light of the aforementioned GST rip off. That debt needs to be extinguished quickly though and I hope that Barnett and Buswell have the blow torch applied regularly to keep them accountable for it.
Julie, The states lost in the high court based on an expansive reading of the corporations power. Michael Kirby wrote a great dissent on that decision
Kirby J (Dissenting)
1. It is unnecessary for this case to outline or define the scope of the corporations power. The corporations power is restrictions placed on laws regarding industrial disputes by s51 (xxxv). What is forbidden is basing a law on one head of power (i.e. corporations power) when it is clearly a law with respect to another head of power (i.e. industrial disputes);
2. laws with respect to industrial disputes must fit within the two safeguards in s51(xxxv) namely interstateness and independent resolution;
3. The high court should be attentive to the federal character of the Constitution.
Callinan J (Dissenting)
1. The Constitution should be read as a whole;
2. The substance of the legislation in question is with regards to industrial affairs;
3. The industrial affairs power includes the two safe guards;
4. As much as the corporations power may purport to support the legislation, the power is still subject to the restrictions of the industrial affairs power for industrial affairs legislation;
5. To affirm the validity of the Act would be to trespass on the functions of the states; and
6. The validation of the Act would result in an unacceptable distortion of the federal balance.
HT: http://en.wikipedia.org/wiki/New_South_Wales_v_Commonwealth_%282006%29#Kirby_J_.28Dissenting.29
They have no shame.
Tas Govt accused of fear campaign on GST
The South Australian border is closer to Perth than most of WA’s resources. The point of our states capital city seems lacking, most of the government departments should not be taking up real estate at the centre of Perth, most of the governments decisions should not be made in Perth but the bulk of expenditure is still metrocentric. The way things stand now we are building useless crap in the city and money making things in the chronically socially underdeveloped regions. It’s not the debt but the decisions that need worrying about. A good investment is a good investment but a dud one becomes an albatross for generations.
That’s unadulterated rubbish. 75% of the population lives in Perth. The state owns the resources.
Jim, of course I know what happened in the High Court. My remarks implied that I found Julian Leeser’s account of the events rather persuasive.