Friday, March 16, 2012

Where has the money gone?

I had a coffee with an educated, right-leaning mining executive yesterday who asked one very simple question no-one in his position should need to ask. On reflection, the very fact that he didn’t know the answer demonstrates what I think is perhaps the biggest challenge facing the Barnett Government as it careers toward the next election.

The question he genuinely asked me was: “I keep hearing that the state has more debt than ever, but where has the money gone?”

If you’ve just paused and wondered how you would answer, my next observation will come as no surprise - Premier Colin Barnett and Treasurer Christian Porter have become expert bearers of bad news and proletarian professors of good.

Have a think about it. How many times have you heard these men explain with crystal clarity that our great state can’t afford this or that because of our burgeoning levels of debt?

To some extent, lowering expectations is a well-trodden political path – you tell people things are tough and you probably can’t afford hand outs, then miraculously just before an election, you pull the rabbit out of the hat and take a bow while the appreciative audience cast their votes.

But sadly for those members of the audience holding their breath, this is no magic trick and there is no rabbit.

If you didn’t know already (because Mr Barnett and Mr Porter have said it ad nauseam) net state debt has risen from $3.6 billion in 2008 when Premier Barnett took the reigns to an expected level around $22 billion in 2014-15. To non-economists like me, those numbers look terrible and sadly for the Liberal-National government, the respectable Mr Barnett (who is an economist) has told the public over and over again, that indeed they are!

However, other reputable commentators such as the Chamber of Commerce and Industry say for a State with WA’s capacity to generate income, that level of debt is not a problem. In fact, the CCI has on occasion, urged the Government to even increase its spending a bit and invest more now to help achieve a better growth curve for the future. So if the State’s very reputable peak industry body is comfortable with our short-term debt forecast, why do Mr and Mrs Brown feel so uneasy about it?

It’s not that we know better than the bean-counters at the CCI, because we obviously don’t. They are truly experts in this field. However, a lot of Mums and Dads don’t get to hear from the CCI – because they simply can’t get the same opportunity to talk to the public as the Premier and his Treasurer do.  When my wife and I plonk down in front of the nightly news eating our microwave dinners from the stable-tables on our laps, we, like our neighbours, see a lot of our esteemed Premier and his anointed in full HD on our energy-sucking 50 inch plasma TV’s. We don’t get to see much of James Pearson’s handsome head, nor do we get to hear from anyone else impartial or even remotely rational on the issue. We, the watchers, increasingly demand something punchy, scary or outrageous from our media and simply lose interest when a credible guy in a suit is saying something sensible.

OK, that isn’t news. Politicians and their advisers have known for decades that the public can’t get enough controversy and just hate the boring stuff.

But that - the fact we all know controversy gets attention – is the point of insight regarding the current WA government.

My observation is that Premier Barnett and his Treasurer have very successfully sold the story that debt is exploding and that’s why we can’t all get presents from the government this Christmas. We’ve been told debt is one of the reasons for the enormous cost-of-living increases this government has forced upon us. We believe police, nurses and teachers aren’t going to get the pay rises they want primarily because of state debt. We know the Perth arena has cost more than expected and we know the solar feed-in-tariff was more popular than our boffins predicted.

But what the government hasn’t explained very well, at least to the well-connected and highly educated mining exec I met yesterday, is why?

OK, let's have a go.

The Government currently employs somewhere around 25,000 more public sector workers than former Treasurer Troy Buswell promised when they first took office – and that adds to state debt. The Fiona Stanley Hospital will cost us a fortune to run. The Perth waterfront is going to get dug up soon, that’s another cost, yep. The government wants to settle native title with the noongar people, ok, a billion there. Speaking of happy aboriginal people, we shouldn’t forget the cost of the enormously successful (cough) James Price Point development. Oh yeah, we’re getting a stadium at Burswood that James Packer isn’t paying for, we think, maybe…  The Oakajee Port is going to cost… oh no, that was going to cost the Government but not any more – cross that one off… umm… err… struggling now…. Western Power wants $10 billion over the next 5 years, no, wait, that’s not in the budget yet….hmmm

You get the picture. Most people couldn’t point to things to justify the extra $18 billion the government has spent so far under Mr Barnett’s leadership. That is an enormous problem for any government which, because of the debt, really doesn't have money to promise anything new in this election year.

And the most uncomfortable truth is that regardless of the number of very well-paid alleged political geniuses in the Premier's office, this amounts to nothing other than a colossal strategic error.

The Premier has used his valuable airtime over the past few years to drum home the message that we need to cap state debt at $20 billion and then scared the living bejesus out of us by having to break the news that not only did he set that number arbitarily, he we will soon take us beyond it by at least 10%. Neither he or his Treasurer have yet to use any of that precious space on my TV to explain to the people who thought Liberal governments were good with money exactly why we’re beginning to think otherwise.

Note: There's a pile of evidence that this administration likes to let one person hang out to dry when failures like this are publicly recognised, so I’ll pre-empt the inevitable finger pointing by defending Dixie Marshall on this issue. She simply hasn’t been the government’s chief bugle for even one budget yet, so it’s clearly not her fault. Nor can the blame be entirely laid at the feet of any of her predecessors.


  1. Error - one zero too many in number of extra public servants.

  2. Hi Anon,

    Thanks for reading the blog and for your feedback - but I can't see the error.

    Just for some background, in Parliament on 10 March 2009, the Premier said:

    "We have also announced a ceiling on the number of full-time equivalent positions in the public service. The public service has grown by 22 000 people over the past eight years. The Liberal-National government has placed a ceiling on the size of the public sector at around 99 000 FTEs."

    Page 12 of the Public Sector Commission's 2011 "State of the sector report" said:

    "The public sector workforce has increased by 4174 employees (up from 148685 to 152859 employees). This represents an increase in the overall FTE (full-time equivalent) of 3061 positions (up from 116355 to 119416 FTEs)."

    Those increases (4174 and 3061) are increases on the 2010 number. I understand the FTE count is now closer to 124,000 - i.e. around 25,000 (twenty five thousand) more than Treasurer Buswell promised would be this Government's cap back in 2009.

    I can't find exact published figures for 2012, so we'll have to wait until the next question in Parliament or state of the sector report to know if my current estimate - but either way, the number of zeros in my first post is accurate - it's more than 20,000 guaranteed.

    Thanks again.