Nick G.
Emperor
Barnett has extended his cupped hands to receive an emergency payout from the
Abbott government only to make it easier to have shackles placed on his wrists.
Abbott’s
finance minister Mathias Corman said today (May 6 2015) that the federal
government would pay WA $499 million for roadworks to offset predicted falls in
GST revenue.
However,
he said there were “strings attached…including further asset sales”.
Background
Prior
to the mining boom, WA was one of the states that needed large amounts of
federal money. As explained in our new booklet
“Federation, the Constitution, Taxes and our Future”, the federal government
raises the lion’s share of government revenue in Australia and distributes all
GST-derived money to the states and territories under an equity principle
called Horizontal Fiscal Equalisation (HFE).
To
ensure that the level of government services is roughly the same in richer and
poorer states, or between urban and rural locations, a state’s own capacity to raise
revenue is factored into the distribution.
WA
chose to impose a fairly significant state royalty on mining operations in that
state so as to access earlier and more directly the revenue from that state’s
mining boom. Hence it received a smaller
share of the GST cake.
When
iron ore prices plummeted to less than half their previous value, state
royalties also plummeted very quickly.
The GST, however, is calculated over a three year average, so the
decline in mining royalties won’t allow an immediate redistribution in WA’s
favour.
Barnett
complained that WA was being treated unfairly, but his interstate colleagues
refused to decrease their GST allocations, claiming WA had benefitted from the
mining boom and should have anticipated a downturn by putting some of their
royalty income aside for just such a rainy day.
Ratings agencies tenderise the WA steak
Like a
piece of fat-enriched Wagyul beefsteak WA government-owned assets were set to
be devoured by finance capital in search of new areas of investment.
The
tenderising of the steak was conducted by the notorious credit ratings agencies
whose power to increase a state’s borrowing costs make them a major influence
for the advancement of neo-liberal austerity agendas. The agencies have an incestuous relationship with
giant corporations who pay for assessment of their own credit worthiness.
Standard
and Poors (S&P) led the way in September 2013 by downgrading WA’s AAA
credit rating to AA+ as the collapse of the mining boom took on a long-term
character. The downgrade was the first
major warning to WA to press ahead with an austerity agenda being demanded by
finance capital.
On
August 25, 2014 Moody’s Investor Services followed S&P, reducing WA from
its triple A rating to AA1. Moody’s
warned WA that unless it “slowed the pace of expenditure” (ie introduced austerity
measures) there would be further downward pressure on the ratings. Rather than warning off the ratings agencies,
the WA Labor Party chose the path of electoral opportunism and warned that
Western Australians would have to face “either higher taxes or fewer services”
unless the WA government changed course.
In a
further softening up of WA for privatisation and austerity, S&P indicated
on April 14, 2015 that it would downgrade WA’s AA+ from “stable” to “negative
watch”, indicating to international financial markets that the state was likely
to deteriorate as a credit risk, and that lending institutions should make it
more expensive for the state to borrow from them. The tenderising proceeded
apace with blunt “advice” from S&P that the state must raise taxes, cut
spending and introduce other “reform” measures.
Telling “sovereign” state what to do
Not
only has WA faced a decline in mining royalties and increased borrowing costs, it
has also shared in the Abbott government’s reduction in the funding previously
provided to the states for hospitals and schools.
The WA
treasurer Mike Nathan had demanded $660 million from the federal government to
help it through the next two years.
Today’s
announcement has diminished that amount by a quarter, but increased the
pressure on WA to push ahead with a privatisation agenda.
In the
wake of the NSW election, Mathias Cormann demanded that WA follow Mike Baird’s
example and put the state’s electricity poles and wires up for sale. Hockey has also demanded such measures
deregulating trading hours and dismantling boards such as the potato marketing
corporation.
Such
demands are clearly resented by the WA premier as interference in his state’s internal
affairs and sit oddly with repeated calls from Abbott and Co for states to be
treated as sovereign entities left to their own devices while the federal government
focuses on matters on national importance.
The reality
is that there are different levels of contradiction being played out here. There is the contradiction between the
federal and state governments over revenue responsibility, but there are also
contradictions between those sections of the ruling class that believe that
state-provided infrastructure is cheaper and more efficient, and those sections
desperate for the investment opportunities afforded through the privatisation
of state assets.
The
people’s interests just don’t get a look in.
While those
in the big end of town argue amongst themselves, working people are set to lose
either way.
The
Labor opposition cannot be relied upon because it confines itself to the same
social system that has caused these problems, and the same parliamentary institutions
that have proven incapable of identifying a solution that protects and defends
the living standards and rights at work of the people.
The
only answer is for the people to strengthen their union and community
organisations in readiness for a major fight to protect jobs and government
services.
The
only answer is for further progress in developing a truly independent working
class agenda around the people’s most immediate interests.
The
only answer is for the demand for Australian independence and socialism to
resonate through a large and organised fightback movement.
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