13 minute read
Benjamin Wyatt MLA | Shadow Treasurer of Western Australia
Benjamin Wyatt MLA
Benjamin Wyatt MLA
Shadow Treasurer of Western Australia
Key points:
• With high levels of public debt and a number of credit rating downgrades, Western
Australia needs to consider new ways of funding major infrastructure projects. • A Labor Government would establish Infrastructure WA, which would have a similar role to independent infrastructure agencies around the country.
Looking at the speakers that you’ve had at what has been an extraordinary conference, I am a little bit unique because I’m from the west, which makes my comments somewhat different: perhaps a little bit of a curiosity. I also have the title – a very humbling title – of Shadow in mine. In Western Australia, we are moving towards a state election next year, so my comments today will be general in nature because there will be policy announcements as we move towards the election.
Regardless of who is elected in Western Australia in 2017, the demands for infrastructure will not change. Our economy is changing from a period of extraordinary investment to a period of operation, especially in the mining sector. It is having a dramatic impact on employment, and we’ve gone from an unemployment rate of just over two per cent to comfortably over six per cent.
The economy is changing, subject to the inevitable boom/bust consequences of commodity prices, like the changes we’ve seen in the iron ore sector. Iron ore makes up just over 90 per cent of total royalty revenue received by the Western Australia’s Treasury.
There has also been a significant shift in the share of gross state product by the mining and petroleum sector. Over the last decade, there has been such significant investment in that side of our economy that it has had a market shift.
This shift can [be seen] in services. While services are still the larger employer by a long shot – more than half of us Australians are still employed in that services sector – a significant share of our gross state product comes off the back of what has been a huge investment in services by mining and the mining sector.
This is the reflection of what has happened to the state’s finances, and has fed to the broader conversation around GST, and the percentage of GST that is distributed to the various states.
In a very short period of time, iron ore sales, mainly from Rio Tinto and BHP Billiton, went from just over five
Benjamin Wyatt MLA
per cent to over 20 per cent of general government revenue. This made our balance sheet vulnerable to the inevitable end of what was record iron ore prices, and that has resulted in the significant operating deficits that we are now seeing in Western Australia.
We haven’t had operating deficits in Western Australia since the late 1990s, because we have had almost a decade of very healthy revenue growth. As revenue per capita, there has only been one year where we haven’t had the highest revenue per capita of all the states in the nation since 2001.
During the first half to mid-2000s, we had large and sensible operating surpluses, which were effectively paying for our capital works programmes. Over the last five to seven years, the increase in revenue has gone into very large increases in wages among our public servants, and the asset investment programme funded by increases in borrowings.
Public debt in Western Australia has been the focus of credit rating agencies that have downgraded our credit rating a couple of times over the last few years. The growth in debt being held in our general government sector has gone from a position of $3.5 billion in financial assets in 2007/08, to the general government sector now holding well over 50 per cent of the total debt of the state.
Business investment is off, driven primarily by the wind-down in the investment side of the cycle of the mining sector. Historically, though, it’s still quite high, and the Western Australia Government expects it to remain so.
Certainly, that is feeding into a rapid decline. State final demand is a little bit deceptive in an economy like Western Australia that is so dependent on exports. If you strip that out, you’d see no domestic economy in the state since the last quarter of 2013. We’ve been effectively shrinking.
This is a little bit deceptive for Western Australia, because if you look back to September 2011, the economy was boosted off the back of one large contract awarded out of the Gorgon Project on Barrow Island by Chevron. It can be distortionary when linear projects are being built in Western Australia.
We are now coming to our asset investment programme. Our asset investment spend by the Government as a percentage of total public sector expenses, and also of net worth, peaked back in 2008/2009, and has been declining ever since.
The Government was effectively competing with the private sector during a period of significant economic growth in Western Australia, and this had inevitable cost impacts on projects. We were also unable to get people to work on them.
Going into the election, the Labor Party has announced that we will be establishing Infrastructure Western Australia. This has been the subject of some political controversy, because moving to an independent infrastructure plan with short-, medium- and long-term infrastructure priorities will be new for Western Australia. Because Western Australia now has a balance sheet, it needs advice on how some of these projects might be funded.
Western Australia has, by and large, avoided the conversation of infrastructure planning because of our revenue growth over the last 10 to 12 years. Most other states have been through a process that the next government of Western Australia, regardless of its colour, will have to have with the people. Because of its size, Western Australia has some unique challenges, we have to have a discussion on how we go about funding the demands for further infrastructure.
The purpose of Infrastructure Western Australia will be to ensure that we don’t see the public spending billions of dollars without paying, without a business case, without costings, and without knowing what a project actually is.
We also have an immature unsolicited bid proposal policy in Western Australia. There will be some announcements with Labor between now and the election around making it more attractive for firms to make unsolicited bids in Western Australia. At the moment, it’s not attractive to people to go through the cost of preparing bids in the event that Government doesn’t go down that path.
My colleague, Shadow Transport, Planning and Finance Minister Rita Saffioti, and I have been doing a lot of work around value capture – in particular, our public transport and urban renewal policies.
METRONET, which we took to the last election in 2013, is a significant public rail commitment from Labor to increase rail capacity across the metropolitan region. Those who know Perth know that you can go north and south. You can’t, however, travel with great efficiency east and west, and that is what METRONET, in part, is being designed to do.
But significantly, METRONET will also invest in the removal of level crossings, and to this end, we have looked to Victoria and the Andrews Government. We are looking to remove level crossings on what
Benjamin Wyatt MLA
we call the ‘heritage lines’. Only 10 per cent of the current public transport usage comes from three main heritage lines because they are old, they are often unsafe, and they are still in the old style. They are surrounded by acres of empty space, and do not capture value from that land.
The opportunities for METRONET include using some public land investment, and private skills and ideas, to go about replacing not just level crossings, but also train stations, and ensuring that we create train stations that are genuinely transport-oriented developments. The Public Transport Authority of Western Australia is very good at delivering and operating rail, and very bad at ensuring that it’s done in a way that captures value. In Western Australia, we still insist on a model that builds a train station and surrounds it by acres of car parks, and then we wonder why we can’t capture value as a result. METRONET will be a big part of the next election for Labor, and a big part of what we intend to deliver in the event that we are elected.
There has also been a significant debate in Western Australia over the future of Fremantle Port. The Labor Party is committed to Kwinana outer harbour. This has, by and large in Western Australia, been a bipartisan position for the last 30 years.
Fremantle is probably close to capacity. There have been various debates about what the capacity is, but the capacity is driven more by the fact that it is now surrounded by residential development, more than the capacity or containers through the port.
The Liberal Government is keen on increasing the long-term capacity of Fremantle, whereas Labor is keen on a new – and will be pursing a new – outer harbour at Kwinana, south of the current Fremantle Port. We have announced that it will require, in due course, a cap on Fremantle Port once Kwinana is built, and then a transition of container freight through Kwinana.
This represents two significant – admittedly medium- to long-term in respect of Kwinana, but also some short-term in respect of METRONET – infrastructure demands for the new government in Western Australia.
One of the purposes of Infrastructure Western Australia will be to lead submissions to Infrastructure Australia. Western Australia has been very bad at making its case to Infrastructure Australia. We have presented one project to Infrastructure Australia of any detail to try and get some Federal Government support for our projects in Western Australia. Historically, government in Western Australia has preferred the model of a dialogue between the Premier and the Prime Minister of the day.
That is not sustainable, because we are effectively in competition with other states. In fact, Federal Minister for Infrastructure and Transport the Hon Darren Chester MP also noted earlier today that continuing to rely on ad-hoc capital grants from the Commonwealth Government is not a sustainable model. We need to make our case in Western Australia in a much more sophisticated way, and that comes from the sort of infrastructure structures that we will be pursuing in the event that we form government next year.
Western Australia has a problematic balance sheet; we’re all familiar with it. We’re also going through a period of reasonable economic growth, driven primarily by the volume of iron ore exports leaving our ports. But that is having an impact on unemployment, and the demands on Government continue. Whoever is elected in 2017 will have the demands of government, including health and education, but also the demand to deliver infrastructure across a very large state.
That means that the Western Australian Government and Western Australians need to be more sophisticated in how we go about funding and delivering infrastructure, and that means having a conversation that many of the states of Australia had almost a decade ago. There hasn’t been that demand in Western Australia, but our balance sheet and our transition out of an investment phase means that it needs to happen.
Ben Wyatt was elected to the Legislative Assembly in a by-election held in March 2006 to fill the vacancy created when the Hon Dr Geoff Gallop resigned.
Mr Wyatt is currently the Shadow Treasurer, and also the Shadow Minister for Indigenous Affairs, Native Title and Cost of Living.
BMD DELIVERS NATIONALLY WITH A LOCAL PRESENCE
Wholly Australian-owned and operated company BMD has enjoyed strong and consistent growth over the past 37 years of operation. This year presented an opportunity to redefine capabilities and establish new geographical benchmarks.
Tiger Brennan Drive Duplication, Northern Territory
BMD is a national group of companies that is engaged in engineering design, construction and land development for clients and partners in the sectors of urban development, transport infrastructure, and resources and energy.
Since 1979, BMD has employed a relationship-based business model by valuing its people, collaborating with its partners and delivering exceptional projects with sustainable outcomes. With more than 1700 employees throughout Australia, BMD has the resources and experience to deliver projects ranging in size, from $1 million to more than $1 billion.
BMD’s expansion into new capabilities and a broad geographic footprint has positioned the company as a major player in the national construction and property industry. Due to repeat business with a number of clients and a diversification strategy, BMD continues to grow a portfolio of assorted projects.
As part of the Transcity joint venture, BMD Constructions, along with Acciona Infrastructure and Ghella, completed the $1.5-billion Legacy Way tunnel for Brisbane City Council, and this experience took BMD on a journey into the complexities of an internationally significant project. The successful delivery of the project can be attributed to BMD’s ability to deliver unique and innovative design and construction solutions for both surface and underground activities, as well as the seamless logistical operations required in the precast facility, underground excavation, tunnel fit-out and commissioning.
BMD Constructions recently delivered Wyndham Harbour, an iconic destination involving an integrated waterfront residential estate and marina development on Port Phillip Bay, Werribee South, in Victoria.
Throughout the five-year construction period, BMD remained committed to providing a high-quality product to meet the client’s expectations, delivering more than $59 million in construction works over numerous stages. BMD Constructions worked in close collaboration with the client to progressively develop on the initial scope and create cost-saving opportunities by challenging the original designs. The project team successfully developed the design to reduce dredge depths, extend the foreshore, optimise breakwater design and offset the cost of additional scope elements, while incorporating protection of both endangered vegetation and an underground aquifer.
BMD’s longevity in business has allowed the company to take calculated risks to not only sustain growth given the market
Wyndham Harbour, Victoria
conditions, but to also broaden its scope at a manageable pace. The private ownership of the group facilitates a speed of decisionmaking that, when coupled with financial strength and capability, provides outcomes of the highest possible mutual benefit for clients.
BMD’s success remains underpinned by the philosophy of ‘we see things differently’, and this is what sets the company apart. It is BMD’s commitment to this approach to business that enables the company to work collaboratively with clients, ultimately delivering projects with capacity and certainty, focusing on people, clients and the local community.
Exemplifying this commitment, BMD capped off almost two decades in the Northern Territory this year, with the delivery of its first managing contractor role.
With Tiger Brennan Drive’s project vision being ‘Driving growth in the Territory’, a significant focus was placed on enhancing local capacity, encouraging Indigenous engagement and engaging the community’s support, while ensuring minimal traffic disruption and value for money. The project has demonstrated the strength of systems along with the commercial capabilities of the business. Collaboration with the client and local contractors has not only expanded Darwin’s skill base (with an extremely high 92 per cent of work delivered by local Territory-based companies), but has also provided employment opportunities for Indigenous Australians – something that BMD is very much committed to.
The success of this Darwin project enabled BMD to draw on its strengths and learnings, and the company has been further awarded a construction manager role with Townsville City Council for the Townsville CBD Utilities Upgrade. In line with BMD’s approach to support the local communities in which it operates, this way of contracting management provides an ideal opportunity to contribute to the community, including aiding in the development of the local industry.
With the engagement of local subcontractors, BMD is working collaboratively to successfully deliver this large-scale project, while at the same time upskilling the local workforce and providing an overall residual benefit and growth to the region. This way of business not only results in excellent relationships with the local community, but it also provides an enhanced skills legacy after the project is complete.
BMD’s strong relationship-based business model is founded on certainty, collaboration and performance. This approach was instilled through many successes in the early years of the business, and has stood the test of time in a highly competitive market. It remains BMD’s strongest competitive advantage.
