CEDA Treasurers Debate Speech

By February 9, 2017Victoria Park

This year WA stands on the cusp of an opportunity to remove a tired old Government wedded to eight and a half years of decisions and to embrace a fresh narrative built around reform of Government, a plan for jobs, refreshed public transport and a new Port.  Importantly, if elected, WA Labor will be a Government that listens, engages and develops policy hand in hand with our community (including the business community) rather than announce to our community what policy will be.

Much has been said about the diabolical state of the finances WA now faces.  After what has been the greatest period of wealth creation in our State’s history, despite record revenues (even allowing for the unfairness of the GST) – people quite rightly ask the question – how did we find ourselves with record debt and deficits?

Despite the balance sheet Government continues – over the coming four years the Government is still projected to spend $121billion.  It’s how and where that money is spent that ultimately guides the debate around election time.

The Liberal Government is wedded to nearly a decade of decisions, it has become stale, rigid and unable to adequately respond to new and emerging issues, indeed, even contemptuous of these issues.  The opportunity of a new Government is that it resets the decision record and allows new decisions to be made, old decisions to be abandoned and a new agenda to be pursued.

Regardless of your view of WA Labor, we have not been an inactive Opposition.  We have worked hard to cement relations with the business community (often at strong critique from my Liberal colleagues), we have developed and issued a wide range of policies, whether they be METRONET, a comprehensive Plan for Jobs, tourism and health – we have put out positions for public debate.  Many of you in this room have worked with WA Labor to assist us in our policy development and I thank you sincerely for your input.

While this coming election has many moving parts, it is still, fundamentally, one of the Government and the Opposition.  A Government offering a combination of a new mining tax (and make no mistake, a re-elected Coalition Government will introduce a mining tax) and the sale of Western Power to fund a new trajectory of spending or an Opposition that is so outrageous to be re-allocating money that sits in the Budget.

Perhaps the most significant announcement made by WA Labor was Mark McGowan’s speech to CEDA in December last year. This announced WA Labor’s intention to undertake a comprehensive reform of the General Government sector, our ‘Services Priority Review’.  Such reviews are not uncommon for newly elected Governments but they are nearly non-existent from a re-elected Government simply because they are, inevitably, bound by its near decade of decisions.

Our Review was reported, almost solely, on WA Labor’s intention to reduce the number of Senior Executive positions, again, not unusual for newly elected Governments.  But the real story in this Review is the intentions for Government reform and the targets it sets.  A fundamental re-basing of the General Government sector, a target to reduce the number of Departments and Agencies by 20 per cent and to hold the CEOs and Directors-General to account for the priorities of Government – and to pay them according to these results.  An efficient, sustainable public sector that presents itself this way to the public is serves.  The only surprising aspect to this is that it is not yet in place.

Yes, our Review will be tasked to identify significant recurrent savings across Government as we do need to rebase our spending that has surged over the past eight and a half years.  This will allow for WA Labor’s priorities to be implemented but also to allow a more sustainable base to the General Government sector for the future.  I remind you all that, without a word on potential savings prior to the 2008 election, Mr Buswell’s Review, titled the ‘Economic Audit’ rapidly found $1.25billion in recurrent savings across a spend of $86billion – significantly less than the $121billion over the coming years.  Our Review is needed, timely, achievable and is the only method by which the General Government sector can be reformed and the ongoing recurrent spend of Government made sustainable.

I talk about the General Government sector as it is this that is the story of our State’s debt position.  When WA Labor lost the 2008 election the General Government sector was net debt free.  By the end of this financial year it is expected that the General Government sector will contain 60 per cent of the entire net debt of the State, rising to 65 per cent by 2020.

This is the fundamental story of the Liberal Government – a break from the two decade old consensus that non-income generating assets be funded from current revenues.  This is why the Premier, in his first substantive speech as a Parliamentarian (28 August 1991) stated:

We need to shift the financing of non-income generating assets away from debt finance into finance from current revenues.  That is the socially responsible thing to do, it is the economically responsible thing to do, and for this generation it is a fair thing to do for the coming generation’.

This is important as everyone needs to understand that the sale of Western Power will not reduce this net debt position by one cent. Not one.  It will, in fact, make it harder to manage this debt as we remove the revenue from Western Power from our General Government revenue base.

This is why, in commenting, and advising, the NSW Government UBS described the fiscal impact of the sale of the State’s energy assets as likely to ‘worsen its fiscal position in the long run’.

It is a monopoly asset that is important to ordinary Western Australians so WA Labor will not privatise it.

Health

I have spoken to many of you about the elephant rampaging through the State’s finances, and that is health.  Nobody disputes the fact that the current Government has spent a lot of money on health. They have indeed.  Huge sums.  However, it is the increased percentage of the total spend and the poor efficiency of that spend that should concern every Western Australian.

From 2001 – 2008 the health spend sat, consistently, around 20-24 per cent of the entire annual General Government spend.  Since 2008 health’s share of the Budget pie has increased to 29 per cent and going only one way.  Of more concern is the efficiency of the health spend.

The 2014/15 State Budget had a key budget strategy that assumed convergence between the cost of delivering public hospital services in WA with the national average cost of hospital services by 2017-18.  At that time our costs were 8 per cent higher.  A year later this differential had grown to 10.3 per cent and by the current Budget, had grown to 18 per cent and the ‘key budget strategy’ to converge was abandoned by the Government.

This is why WA Labor has announced what will, in effect become, Reid Review Part II.  A fundamental review of the Health system to guide Government to bring sustainability to the health system.  In developing our draft terms of reference WA Labor has taken advice from a range of health experts, both medical and financial, and it is my view WA has a tremendous opportunity to benefit from national and international learnings around procurement, strategic sourcing, integrated pathways and culture change which contribute to better patient healthcare.

WA Labor will release its draft Terms of Reference regarding this Review in due course.

I’ll be frank – If this is not done, the question will shortly have to be asked – what areas is Government getting out of to allow the health system to continue to grow at the rate it has done?

Infrastructure

For too long in WA the debate around the provision, and funding of, major State infrastructure, has been reactive, ill-informed and led by the whims of the Premier.  This must stop.  This is why WA Labor has announced the establishment of Infrastructure WA to assist in the development of a State Infrastructure Strategy.  Personally, I see it modelled on Infrastructure Victoria that developed a 30 year strategy and, importantly, assesses new models of funding infrastructure.  This is new to WA and will ensure that we have a body that can make sophisticated and persuasive submissions to Infrastructure Australia – a capacity that WA has sorely lacked

We must, as a State, be able to present more than one business case for one particular piece of infrastructure at a time to Infrastructure Australia.

As Peter Newman has said, indeed at a CEDA function last year, the WA Government has adopted a ‘cocktail party’ approach to infrastructure funding, where a State Minister sidles up to a Federal Minister, SSB in hand, and pitches an idea.  This cannot continue.

For the private sector, rather than infrastructure that appears in a ‘fully costed’ election campaign only to disappear shortly thereafter, Infrastructure WA means that you can have confidence in the long term planning arrangements around key State infrastructure.

[As you are no doubt aware WA Labor is committed to METRONET.  It is somewhat different to its first iteration but still a fundamental revolution of our public transport system.  Public transport is Labor’s bread and butter.  We announced our costings and funding package earlier this week and it is affordable, realistic and relies on a range of funding sources, including, for the first time, a concerted effort to capture value from the spend of public monies – applied to some specific stations (Bennett Springs and Midland) there has been real enthusiasm for engaging the private sector in the planning of METRONET, both in its design and in its funding].

I want to make some comment on a key piece of infrastructure that if I can have a role in getting started, I will retire happy. And that is a new Port at Kwinana.  That is truly transformative for the WA economy.  We are an export economy and our Port at Fremantle is old and constrained.  This is a prime example of the need for Infrastructure WA.  The only real piece of rigorous work that has been done is, to its credit, by the City of Kwinana – the business case for this sort of asset should have been done years ago by State Government and highlights the fundamental importance of Infrastructure WA.

This is why it is WA Labor’s view that public ownership of Fremantle Port is so vital as it allows for the development of a new Port and the transition of activity to it.  The Government refers to a new Port at Kwinana only as ‘overflow’ – for the life of me I cannot understand why anyone, public or private, would invest in new Port facilities for overflow purposes only.  While the detailed work needs to be done I see the private sector as playing a large role in funding the new Port, and from the many meetings I have had around this, there is a real appetite for this proposal.

WA Labor has many proposals that have been announced over the last 12 months, including:

–             reform of the Unsolicited Bids process to more adequately recognise those companies that make the effort, and take on the sometimes not inconsiderable expense, in putting together a bid;

–              A bold and proud policy to increase the amount of work we do on our rail cars locally.  The only organisation that seems to think two per cent local content is appropriate is the State Government;

–              bringing the Economic Regulation Authority back into the process of an independent report on micro-economic reform.  Started by Mr Buswell, abandoned by Mr Nahan;

–              fundamental reform of a tired, inefficient procurement process that fails to maximise the purchasing power of Government by regularly testing contracts and providers;

–              expand the innovation agenda to broaden its focus from simply technology. Social innovation, impact investing – all areas that I am keen to explore as Treasurer and as Minister for Aboriginal Affairs;

–              two that I am particularly proud of, to aggressively move to divest the 10 per cent of Western Australia that is held in the Aboriginal Lands Trust to ensure Aboriginal people have the economic opportunities from this vast land estate held on their behalf.  And create a WA Aboriginal Ranger program to provide employment and embrace the vast interior of our State in which our cultural identity lies.

All in WA Labor are all excited by the opportunity to bring a fresh agenda to Government in WA.  I hope I have the opportunity to work with you all as State Treasurer – as to achieve what we need to in our great State everyone in this room and the organisations you represent will need to step up and ensure that the Government can do what it needs to do and what it should do.