Monday, May 23, 2011

Colin Barnett's Budget and WA and Commonwealth relations

Sarah Burnside has written a thoughtful piece in New Matilda about the political theatrics displayed by WA Premier Colin Barnett and his ability to exploit the  natural hostility West Australians have for Federal Governments in Canberra, particularly Federal Labor Governments.

Sarah argues that Colin Barnett's decision in the State Budget to increase state mining royalties is one of a long line of showdowns over the years between the West Australian Government and Canberra. It  is also a potent political ploy that has created problems for both Federal Labor and the WA Labor Opposition. Sarah writes:
Last week — in an exception to the general rule that state budgets are of little interest to the nation at large — the WA Liberal-National Government announced an increase to mining royalties, eliciting criticism from the federal Government and delighting the Opposition. 

The royalty increase was provocative in light of the proposed minerals rent resource tax (MRRT). In cutting a deal prior to the 2010 election, the Government promised that any future royalty increases would be rebated once the MRRT was imposed in 2012. Thus it looks a lot like WA gazumped Federal Labor by incurring a debt on the Commonwealth’s behalf........

.................The Government disagrees. Julia Gillard has confirmed that adjustments will be made to infrastructure spending to Western Australia to "protect the federal budget". Martin Ferguson, who confirmed that the government would honour its deal with the mining industry, criticised the increase as a "short term grab for cash" which may be "to the eventual disadvantage of the West Australian community". Wayne Swan has disputed the numbers: the WA Government claims that the increase will represent $2 billion over the next three years but Swan argues that there is "a real doubt" as to the accuracy of this prediction.

In any event, as business reporter Michael Pascoe pointed out, the Commonwealth Grants Commission process adjusts monies given to the states against the revenue they raise themselves. Pascoe charges that Barnett has "wilfully damage[d] his own budget … to score a petty political point against Canberra, recording the most Pyrrhic of victories". This is politics-as-theatre; in the next act the Premier, a picture of outraged innocence, characterised Swan and Gillard’s remarks about infrastructure spending as a threat.
The dispute puts the WA ALP in a difficult position. Leader Eric Ripper stated rather vaguely that if the federal government "threatens infrastructure spending…that would show a complete lack of understanding of how politics in Western Australia works." 

This stand-off has been brewing for some time, as illustrated by complaints about WA’s GST share: of each dollar of GST revenue generated within the state, it receives about 68 cents. In late March, in what was seen as an attempt to placate the mining states, Gillard announced a "full scale review" of GST revenue allocation. Barnett was not mollified. In April, he charged that Tasmania had "become Australia’s national park", asking "what right is there to simply take some of the spoils of the hard work in other states?" The presence of iron ore within state boundaries seems increasingly to be viewed as the result of some special virtue on WA’s part — rather than of luck and geography"

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