Western Australia has a serious problem it needs to deal with. When confronted with unprecedented growth in the mining industry, WA could take the easy political option of spending up big and business as usual, or the more difficult path of others in similar circumstances by putting the windfall revenue away for a rainy day.
When the Barnett Government belatedly opted for a sovereign fund, they chose the one of the worst possible models – and Labor opposed the entire concept. What this bellowed was that neither side of politics understood what was going on around them.
The end results of successive WA governments’ mismanagement of the unprecedented growth are more reminiscent of Nauru than of a progressive economy. It’s easy to jump into political hyper-talk mode and blame the GST and falling iron ore prices for our budgetary woes, however both these events are cyclical and predictable.
With regard to the GST distribution, the recent brouhaha has been a boon to the Premier and the media, but a quick peek at the WA Treasurer Christian Porter’s one and only budget will show that GST revenue has not yet fallen to the levels he predicted in May 2011.
Porter not only predicted the fall, he fantasised about the Grants Commission in 2013/14 changing to a floor of 75 per cent as the state’s GST share and warned: “If that change does not occur in that year, the state government will then have no choice but to wind back infrastructure investment to decrease debt.”
Predictably, the change did not occur, but neither did slower spending and debt still increased… and Mr Porter headed off to Canberra. How can that happen?
How is it possible for a government to completely ignore its own official bean counter’s warnings of an impending revenue fall and act this way? For some reason, drunken sailors keep springing to mind.
The fall in the iron ore price has erupted as a major conspiracy theory more suited to the dark internet than any official position. But even if it’s true, why didn’t anyone in our Parliament notice that increasing supply leads to a lowering of prices?
Supply and demand is economics 101 – were none of the institutionalised economists in the big house awake?
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