Thursday, 22 February 2018

6PR - Morning with Gareth Parker



Subjects: The Langoulant Report on WA Government; NorthLink;

GARETH PARKER: The Attorney-General is Christian Porter, he is on the line.

Christian, good morning.

ATTORNEY-GENERAL: Yeah, morning Gareth. Lots to talk about today.

GARETH PARKER: Lots to talk about.

The Langoulant Report is where I want to start. It came out earlier this week; it painted a damning picture of mismanagement by the government of which you were an integral part. Particularly it made the point that the recurrent expenses of the government, the budget, got out of control in the first term, particularly in the period where you were Treasurer.

ATTORNEY-GENERAL: Well, I must say, I've now read the summary of it. I'm not sure that's exactly what it does say, Gareth.

So, over the previous Labor government, their recurrent expenditure was 8.7 per cent, I inherited a budget where it was pushing up very high towards 10 per cent, and I left where it was 3.7 per cent recurrent expenditure. So, of course, I was Treasurer for two years, and it is true that during those super-heated times of the boom, when we had 1500 people a week coming to live, there were massive pressures on recurrent expenditure. But after my last budget, it had actually gone down to 3.7 per cent. So, I mean, I look back, there's always things that you would do slightly differently, I think, in those sort of periods. But I left two surpluses, $650 million and $250 million, recurrent expenditure down at 3.7 per cent; it was stable and tracking downwards in the out years.

So, yes, I saw that John had some criticisms about a range of aspects and in particular, projects. And I noted his criticisms about Royalties for Regions. But my own view about the time is that it was left in pretty good shape when I was Treasurer.

GARETH PARKER: There was one critical decision that was made in one of your budgets that set the state up for the trajectory of failure that it later went on, and it was a critical assumption about the GST. Treasury told the government that the GST was going to fall, and it made the point that this was basically a mathematical inevitability, it was a formula, there were inputs, there were outputs. But in that budget that you handed down, there was an assumption made that the future GST receipts would be held at a 75 cent in the dollar level, effectively because the government was of the view that the feds would bail us out. That appears to me to be a critical miscalculation.

ATTORNEY-GENERAL: But that assumption was never made. And I don't see in John Langoulant's report that he says that assumption was ever made. The actual history of this was that the Gillard Government put together a review into the GST, and they made very firm statements that that was going to result in a fixed and changed system, and those statements were unequivocal. And in fact, what they said was - this is Gillard's words – ‘the review will lead to a simpler, fairer, more predictable, and more efficient distribution of the GST’. We didn't make assumptions that that was going to occur. None of the assumptions in the budget were based on that actually occurring. We were, in good faith, optimistic that that would occur - it didn't occur. And in fact, I recall that my words at the time were that if that change did not occur, then the State Government would in the future have no choice but to wind back infrastructure investment to decrease debt. They are my words from the budget.

So, it's not true to say that we were assuming that it would happen. We were very hopeful and optimistic, based on the strength of the representations we'd had from Gillard that it would happen, but we realised and certainly I as Treasurer realised that if it didn't happen, you would have to engage in some moderation on the infrastructure spend, there's no doubt about that.

GARETH PARKER: And that clearly didn't happen.

ATTORNEY-GENERAL: Can I just make a general comment …

GARETH PARKER: Sorry. Just on that, just on that, that clearly didn't happen, though, did it? The point is that as circumstances changed, the government failed to adjust its budget trajectory.

ATTORNEY-GENERAL: Well, you can make that criticism. But equally, one of Colin Barnett's great gifts was that he actually got projects done and completed. The sinking of the rail line …

GARETH PARKER: But that's easy to do, if you're just prepared to take a blank cheque book to it, Christian.

ATTORNEY-GENERAL: But it's actually not easy to do Gareth, because these things had been on the books …

GARETH PARKER: Well, it's easier than showing financial rectitude.

ATTORNEY-GENERAL: These things had been on the books for literally decades, 40 years or more. And Colin Barnett is actually the sort of person who was able to drive those projects home.

GARETH PARKER: Yeah, because unlike Eric Ripper, he wasn't interested in delivering healthy budget surpluses, he was interested in building everything at once.

ATTORNEY-GENERAL: Well, these are always exercises in balancing. But even when you look at the Langoulant report and I mean, the Perth Stadium was probably the largest project that I was responsible for in terms of the time I was there within planning, largely, with respect to the Stadium, the report is positive. I mean, John Langoulant makes the criticism that the overall cost was announced prior to what he would describe as comprehensive planning being undertaken. But he basically positively assesses the project.

But it was Colin Barnett's willingness to actually commit to these projects, and make the announcement, and commit to a site, and commit to a build that meant that we end up with a stadium, rather than another decade talking about a stadium. So, people will make their critiques as to whether or not in that last second term, given declining GST shares, Colin spent too much, the right amount, or too little on infrastructure, few people I think will argue he spent too little. But the reality is that we are now with infrastructure which will be a lasting benefit to West Australians for generations.

I mean, I look at the criticisms of the Royalties for Regions program, I certainly think there's some observations in there that are worth looking at.

GARETH PARKER: So, on that, why did you allow - as Treasurer - a shadow budget process to evolve where the Nationals basically ran their own race with pre-allocated big buckets of money?

ATTORNEY-GENERAL: Well, I mean, that was not exactly what happened. Again, I wouldn't seek that description of what happened. But the reality was that there was an agreement with the Nationals to form government, that there would be an account which could cap out at $1 billion which they were able to allocate to the regions. And a lot of very worthwhile important projects the regions never would have seen had it not been for that agreement occur …

GARETH PARKER: And a lot of projects that were very poorly planned, had poor business cases, resulted in wasted money, resulted in local governments now having facilities that are either not fit for purpose or facilities that they can't afford to maintain.

ATTORNEY-GENERAL: Yeah, and I've read that critique. One of the responses that I had to that was that when the Royalties for Regions account was looking to very substantially exceed that $1 billion mark with the agreement, I might add, of Brendon Grylls and his assistance, we started the Future Fund, and that was started with, in effect, $1 billion worth of Royalties for Regions money, which is now available to gather interest and have that allocated to future projects for future generations of West Australians.

And the reason that I did that was because I did have a sense that the Royalties for Regions spending had reached about the appropriate peak, and that allocating any more to it, when Royalties revenues were so high, wasn't in the best interests of the state. And my response as a Treasurer to that was to put an enormous amount of that money aside so that it was available for future generations of West Australians. And I think, again, that was an important response.

GARETH PARKER: Although a Future Fund with a balance of $1.5 billion to $2 billion, whatever it is now, isn't of all that much value, I would suggest, when state debt is over $30 billion, but that's my call. I'm sure you disagree.

ATTORNEY-GENERAL: Again, people will have differing views about that, but in my time as state Treasurer, debt was stable and it was stable and it was tracking down at the end of the forward estimates.

GARETH PARKER: So is it Troy Buswell's fault and Mike Nahan's fault and Colin Barnett's fault?

ATTORNEY-GENERAL: Well, I'm not saying that, but what I can say is that I was very conscious, personally as a Treasurer, about recurrent expenditure and about producing surpluses, and what I produced were two very healthy surpluses, an actual recurrent expenditure in the '12-'13 year of 3.7 per cent. And I don't think that that is a bad platform from which things could have taken off.

GARETH PARKER: Can I move on to an issue that we've been covering this morning, and that is the BCL Group. Callers off-air who are in the middle of this have told us that one of the projects that they haven't been paid for, as people who have either supplier relationships or subcontract relationships with BCL Group, is the NorthLink project that runs right through the northern suburbs of Perth. It's a critical project. I understand that 80 per cent of the money for that has been stumped up by the Commonwealth. It's a pretty unsatisfactory state of affairs when big government projects result in subcontractors not being paid or going broke.

ATTORNEY-GENERAL: It's hopeless, and so this is a $1 billion project; gets rid of 16 sets of traffic lights; it's meant to create 7000 direct and indirect jobs; 80 per cent of that $1 billion is funded by the Commonwealth Government, after fighting very hard - myself and others - to get that money here. If it is the case that the State Government can't manage to allocate those monies to that project in a way that sees the people who are actually doing the work get the money that they're due and owed, that is a terrible and very, very serious situation. I was quite shocked by the callers that you had in this morning. I might invite anyone out there who's worked on NorthLink as a subbie who has had these type of difficulties to contact my office so that I can know about them firsthand.

But at the end of the day, it should not be that difficult for the State Government, on Main Roads Department's biggest ever single project, to ensure that the monies that the State Government are allocating from the taxpayer through the Commonwealth Government to get the work done actually reaches the pockets of the people who do the work. Like, the sort of relaxed view that was coming from the State Minister that you interviewed this morning I found somewhat surprising. I mean, there are subbies out there not getting paid on the biggest road project in WA's history, funded through the taxpayer. I mean, this is something that needs to be looked into and remedied with some extreme urgency, I would have thought.

GARETH PARKER: Can't say that Michael Mischin ever did much as the commerce minister about these issues. They're not exactly- they didn't exactly appear five minutes ago.

ATTORNEY-GENERAL: I'm not suggesting that they're issues that have emerged solely on this project. This is a huge project, and it seems to me that with big contracting organisations like BCL, and it appears to be others, experiencing financial difficulty, that this issue, which has always been an issue I mean, no one's denying the fact that money flowing from contractors to subcontractors, this has been an issue since there was such thing as contractors and subcontractors. But where you've got $1 billion government projects being run and operated and monies allocated by the State Government through Main Roads Department, and some of the biggest contractors having financial difficulties and leaving what now seems to be a critical mass of subcontractors out of pocket, this is something that the State Government absolutely has to take charge of right now.

GARETH PARKER: Alright. We're out of time. We need to move on but I appreciate your time this morning, Christian.

ATTORNEY-GENERAL: Okay. Cheers Gareth.

GARETH PARKER: Christian Porter, the Attorney-General.