WA - who stole the cookies from the cookie jar?

[monotonehell]

Interesting opinion piece by Ian Verrender about WA's current woes and demands that they get more GST revenue than normal, being a fault of their own making.

The state that should be the richest is in desperate straits as it enters a recession-like conditions, global resources companies — having eluded billions in tax commitments — are notching up losses by the score and a manufacturing industry being killed by a resources boom that paid only temporary dividends.

Tasty snippets...

The first pressure point is Western Australia, the state that should be the nation's strongest. Having raked countless billions from companies supplying the minerals that fuelled China's incredible growth, it has emerged from the boom in a parlous financial position. Its credit rating has been smashed and state debt has mushroomed.

The second is the sudden realisation that almost all our major resources companies — minerals and energy — got it horribly wrong when it came to managing the boom, and now are in the throes of writing off billions of dollars of dud investments.

Western Australia Premier Colin Barnett has launched a strident campaign about the raw deal meted out to his state when it comes to carving up the proceeds of the Goods and Services Tax. But those tears are pure crocodylus porosus. The GST funding crisis enveloping the West was the State Government's own making and the consequences were entirely predictable.

For almost the entire history of federation, Western Australia has been on the receiving end of financial support from the eastern states. Even in the modern era, since 1981, it has been subsidised in 19 of those 35 years. Of the remainder, it has only ever contributed more than NSW and Victoria on eight occasions; from 2008 until now. There is no shame in that.

When the states formed a federation in 1901, they committed to the principle of providing the same standard of services and infrastructure to citizens across the nation. Ever since, richer states have distributed tax proceeds to less well-off states.

So how did it come to this? Why is that WA now receives just 30c from every dollar it raises in GST, the lowest of any state in Australia's history? Simple really. WA hatched a plan to ensure the Commonwealth retrieved virtually nothing from the mining tax by ramping up its state royalties, so the proceeds of the mining boom remained in WA. That pushed its income into the stratosphere for a brief few years.

WA seized on a mistake by the Gillard government when it was forced to hastily renegotiate the mining tax and included a clause that the federal government would reimburse companies for any royalties paid to the states. Effectively, that meant the Commonwealth paid the state royalties, not the miners. On cue, the WA government doubled royalties just as iron ore prices soared to $US190 a tonne, which pumped revenues threefold. Cash cascaded into WA's coffers, while virtually nothing flowed to the feds.

The WA Premier and his Treasurer always knew this would be a short-term phenomenon, that the cash deluge ultimately would hit the GST take. The GST carve-up is calculated using a three-year moving average of state income. So, a lag is built into the system and the day of reckoning was always just a few years down the track. As WA's per capita income soared to the highest in the land, the formula dictated it would only take a few years before the Commonwealth Grants Commission equalised payments by shifting GST revenue to other states.

Not content with the initial bonanza, WA raised the royalties a second time, all the while proclaiming the evils of the Rudd Gillard mining tax. Not only that — because of the lag associated with the way the distributions are made, WA was receiving a far greater share of GST during the boom than would have been the case if the payments were calculated on an annual basis.

Even when the Abbott government axed the mining tax, WA maintained its sky-high royalty charges, rejecting calls by the industry to reduce the impost. In the past financial year, even after iron ore prices had collapsed, the effect of the royalty hikes and the huge lift in production enabled WA to raise $5.9 billion more in revenue than the average of all the other states and territories.

Read the full article here:
http://www.abc.net.au/news/2016-08-29/t ... my/7793146

[claybro]

As the old saying goes... Better to have boomed and bust than never to have boomed at all. The amount of infrastructure constructed and still under construction puts Perth light years ahead of adelaide in terms of road/ rail/ boating and leisure facilities etc. Yes the boom was poorly managed, but what was wa meant to do with 100000 new residents per year most of those in Perth - just say go away, we're full. Or don't buy our resources, we can't keep up? Of course the WA govt was cash greedy, Perth was bursting at the seams, still is. Was Canberra helping out with new trains? - no. All is good in hindsight. And just for the record, it is not a good look when South Australians have anything to say about GST distribution.. After all, when was the last revenue positive year for SA?

[bits]

SA did not create the gst formulas by itself. They were agreed on as a country.

South Australians are on the exact same level as WA, NSW or any other state to discuss how gst is split up.

[claybro]

SA did not create the gst formulas by itself. They were agreed on as a country.

South Australians are on the exact same level as WA, NSW or any other state to discuss how gst is split up.

No one is saying SA is responsible for the way GST is carved up. But there is plenty of scorn from the Eastern States about how WA has blown the boom. Fair enough, but imagine if SA as an economy from next year was faced with 5 years of 100000 or so extra new residents every year, (we wish) so that Adelaide population in 2021 was around 2 million. imagine if SA government had to rebuild 100 or so new train stations, upgrade 100's of kilometres of urban rail, underground stations and CBD tunnel. Build or upgrade a couple of hundred kilometres of freeways, road tunnels new container depots, new regional ports and roads. Naturally a smaller economy like SA or what WA was would have to borrow vast sums to fund infrastructure to prevent the whole place grinding immediatley to a halt. Then mid stream, the price of the goods the state sells drop by 2/3 overnight. Would SA manage any better? NSW or Vic? Queensland certainly seems not to as their debt is also ballooning, and they had to rip funds from other states during the floods. I guess the point is As a state, WA has despite "blowing the boom" constructed some amazing infrastructure in the last decade. This will serve the state into the next boom and for a generation. SA as a state could only dream of such a boom, and given how it gets tied up in knots over electrification of 1 train line and construction of 1 freeway, well as South Australians, I don't think we are in the position to point and laugh.

[phenom]

The final nail in the coffin - to add to Verrender's otherwise stellar effort - is to note that States get funds from the Federal Government in more ways than just GST redistribution. So while WA has acted like a victim with their '30c in the dollar OMG' act, the actual net return when you allow for other funding has been more like 70c in the dollar anyway (source: budget paper 3, 2013-14 - the Liberal Govt omitted it from their budgets for... reasons).

And with their economy cratering, they will be back to being a net drain on the system within a couple of years anyway so they can stop playing the martyr and talking about secession - just like always - until the next mining boom.

[phenom]

And just for the record, it is not a good look when South Australians have anything to say about GST distribution..

No-one bats an eyelid at Tasmania decrying any GST reshuffle and they have been draining the system at a much higher per capita level than SA for decades. The NT is a disaster and the ACT is entirely funded by Federal taxes - even the non-government jobs there exist purely to service the government spending. But somehow in the 'media' it's SA that is the mendicant.

WA has 'officially' (see WA Treasury papers) blamed Federation for their problems for decades now. They claim things like tariffs hit them disproportionately. Well, manufacturing states like SA have been hit disproportionately by the impact on the $A (and hence our export competitiveness) due to WA mineral exports. That's the flip side of their own argument that they refuse to acknowledge.

I think SA has every right to chime in regardless of what ideologues in the WA Government think, especially with people like Nahan being a hypocrite (I note WA won't sell assets to fix its budget deficits even though Nahan spent most of his life working at the IPA which is absolutely against state ownership of assets).

It's called being a Federation - and if WA doesn't like it, well, I don't think the Constitution allows for them to secede unless they do it violently. I'm happy for them to leave as long as all the funds they received since the creation of the grants commission (which was created FOR them) is inflation indexed and then tallied up - they can either pay the balance or get paid the balance whatever it works out to - and good luck being 2.5m people sitting on commodities that see-saw in price over decades.

[SRW]

...imagine if SA as an economy from next year was faced with 5 years of 100000 or so extra new residents every year, (we wish) so that Adelaide population in 2021 was around 2 million.

You're right, it's problem we would wish to have. But you're also overstating it somewhat. Over the last five years WA has grown by about 250k residents, fewer than the ~500k you seem to imply. Though impressive, and above average, it is not unmatched within Australia and yet WA faces the most dire a fiscal predicament. That would indicate local decision-making (ie, the Barnett Government) having more responsibility for the situation than simply factors of circumstance.

[claybro]

...imagine if SA as an economy from next year was faced with 5 years of 100000 or so extra new residents every year, (we wish) so that Adelaide population in 2021 was around 2 million.

You're right, it's problem we would wish to have. But you're also overstating it somewhat. Over the last five years WA has grown by about 250k residents, fewer than the ~500k you seem to imply. Though impressive, and above average, it is not unmatched within Australia and yet WA faces the most dire a fiscal predicament. That would indicate local decision-making (ie, the Barnett Government) having more responsibility for the situation than simply factors of circumstance.

Ok I stand corrected. The population based on a few google searches of PERTH has increased by 350000 between 2011 and 2015- "the boom years" or equivalent of 80000-90000 per year. Still not sure how any state government was to immediately fund the infrastructure requirements for and extra 350000 without massive borrowings. As with Adelaide though, there is no shortage of Eastern State "experts" lining up to kick a smaller state now things have slowed down here in WA.

[BradJC]

Best get your data from ABS.

WA Dec 2010: 2319000
WA Dec 2015: 2603900

Increase: 284900

Probably about 0.75*284900 Perth increase over 5 years.

[rev]

SA did not create the gst formulas by itself. They were agreed on as a country.

South Australians are on the exact same level as WA, NSW or any other state to discuss how gst is split up.

No one is saying SA is responsible for the way GST is carved up. But there is plenty of scorn from the Eastern States about how WA has blown the boom. Fair enough, but imagine if SA as an economy from next year was faced with 5 years of 100000 or so extra new residents every year, (we wish) so that Adelaide population in 2021 was around 2 million. imagine if SA government had to rebuild 100 or so new train stations, upgrade 100's of kilometres of urban rail, underground stations and CBD tunnel. Build or upgrade a couple of hundred kilometres of freeways, road tunnels new container depots, new regional ports and roads. Naturally a smaller economy like SA or what WA was would have to borrow vast sums to fund infrastructure to prevent the whole place grinding immediatley to a halt. Then mid stream, the price of the goods the state sells drop by 2/3 overnight. Would SA manage any better? NSW or Vic? Queensland certainly seems not to as their debt is also ballooning, and they had to rip funds from other states during the floods. I guess the point is As a state, WA has despite "blowing the boom" constructed some amazing infrastructure in the last decade. This will serve the state into the next boom and for a generation. SA as a state could only dream of such a boom, and given how it gets tied up in knots over electrification of 1 train line and construction of 1 freeway, well as South Australians, I don't think we are in the position to point and laugh.

Yada yada yada, more Perth is great Adelaide sucks.

Western Australia put all its eggs in one basket, while arrogantly gloating to the rest of Australia about how better they suddenly were, and now they are screwed and whining to the federal government about getting a bigger slice of the GST revenue carve up.

Boasting about how richer they are then everyone else in the country.Now look at them, begging Canberra for more money.
What a loser state WA is. They are like the bogan who won a million dollars in the lotto and blew it all and has nothing to show for it and is now reduced to Centerlink payments.

Is there any other industry in WA besides digging holes in the ground?
Don't hold your breath for the next boom to save WA.

[claybro]

I presume your comments are purely bait, otherwise you are completely ignorant. Despite the mining downturn, surprisingly, employment has remained resilient. Large employers in WA continue to be warehousing and logistics, a still robust building industry, mining services ( yes they are still mining), ship building.. And not just the government doled out navy stuff, large army , airforce and naval bases, and an ongoing huge infrastructure spend building new freeways, an underground train link to the airport, new football stadium, regional port road and rail upgrades, and a booming agricultural sector. In my whole time in WA , on mentioning I am from adelaide I have had generally positive comments about Adelaide. About how great the footy experience is now there. About how beautiful adelaide is, and how lovely the weather, the hills and the wine regions are. It disappoints me that folk from Sydney and Melbourne put down Perth as much as they do adelaide, it disappoints me even more when Adelaide people slag Perth. Perth is not perfect, but there is an energy and can do attitude here that is missing still in SA. And I hate to say, as pleasant as adelaide is, the road network and general infrastrucure there and general tidiness and irrigation of public spaces are pretty poor by comparison. Just an observation not a judgement.

[ghs]

I presume your comments are purely bait, otherwise you are completely ignorant. Despite the mining downturn, surprisingly, employment has remained resilient. Large employers in WA continue to be warehousing and logistics, a still robust building industry, mining services ( yes they are still mining), ship building.. And not just the government doled out navy stuff, large army , airforce and naval bases, and an ongoing huge infrastructure spend building new freeways, an underground train link to the airport, new football stadium, regional port road and rail upgrades, and a booming agricultural sector. In my whole time in WA , on mentioning I am from adelaide I have had generally positive comments about Adelaide. About how great the footy experience is now there. About how beautiful adelaide is, and how lovely the weather, the hills and the wine regions are. It disappoints me that folk from Sydney and Melbourne put down Perth as much as they do adelaide, it disappoints me even more when Adelaide people slag Perth. Perth is not perfect, but there is an energy and can do attitude here that is missing still in SA. And I hate to say, as pleasant as adelaide is, the road network and general infrastrucure there and general tidiness and irrigation of public spaces are pretty poor by comparison. Just an observation not a judgement.

Claybro, you seem to talk highly of Perth's infrastructure :

Perth Airport is pretty ordinary.
The main football stadium, Subiaco is run down.
The WACA is an absolute disgrace of a cricket ground.

The WA government should be more focused on these issues then irrigation of public spaces.

[claybro]

They are currently constructing a new football stadium. 60000 capacity, Subi is closing in 2018. They have also built a new airport servicing all international flights , Virgin and tiger domestic. Only Jetstar and Qantas remain at the old terminals. Qantas are planning non stop flights with new aircraft from Perth to London non stop commencing in a couple of years which will make perth a hub for Australian travellers to Europe. An underground train will serve the airport and is currently under construction. Yes the WACA ground is poor, but major cricket ie Ahes are soon to be held at the bew stadium across the river. These projects are highly criticised here as a reason the state is so far in debt, but apart from the stadium are part of vital infrastructure which will improve the economy into the future.

[Jaymz]

I lived in Perth from 1998-2008, worked FIFO for the entire time. I saw first hand the rise of the mining boom and all of it's benefits. The industry was actually in a downturn for the first few years I was there.

At it's height, there was approx. 40,000 new homes being built every year, with whole suburbs appearing in the space of a few years. The level of money pouring into Perth is something Adelaide could only dream of. On the flip side to this, towards the end of my time there Perth started to lose it "cruisy" feel, traffic congestion was a growing problem and it seemed like every place had a line-up when we went for a night out. The large country town now feels like a big city.

The amount of money floating around was mind boggling. Infrastructure spending was (and still is) massive, there is so much going on that it's actually no big deal to them. In Adelaide we get excited about a new freeway or tunnel, while Perth builds at least one every year.

Having said that, Perth can in no way match Adelaide's food and pub culture. We punch well above our weight, and a few of my Perth friends always comment on it when visiting. Our CBD leaves Perth's for dead with regards to vibrancy and liveability. But like someone mentioned before, Perth just has a feel about it, a feeling of positivity and a can do attitude, it exudes it from every street. I still feel that when I go back and visit, and it makes me want to move back. That is until I get home again to my Adelaide city apartment

[rev]

From Adelaide we don't need to fly to any other Aussie city to get to Europe.
From Beisbane Sydney and Melbourne they don't need to fly to any other Aussie city to get to Europe.
Even people from Darwin don't need to.

From Adelaide we can fly to Singapore Dubai Qatar Kuala Lumpar and on to Europe and elsewhere.

Why would I fly to Perth to go to Europe?
Maybe if the overall ticket cost was cheaper to fly to Perth domestic and go intentional from there, but how much cheaper would it be?