First Royalties, Then Secession?


Last week — in an exception to the general rule that state budgets are of little interest to the nation at large — the WA Liberal-National Government announced an increase to mining royalties, eliciting criticism from the federal Government and delighting the Opposition.

The royalty increase was provocative in light of the proposed minerals rent resource tax (MRRT). In cutting a deal prior to the 2010 election, the Government promised that any future royalty increases would be rebated once the MRRT was imposed in 2012. Thus it looks a lot like WA gazumped Federal Labor by incurring a debt on the Commonwealth’s behalf — in the Australian last Friday, Peter van Onselen warned: "Wayne, they stole your surplus".

The MRRT has faded into the background in recent months, eclipsed by the carbon tax, but the issue is far from dormant. After Barnett’s announcement, Tony Abbott seized the opportunity to once again damn this "great big new tax" as unworkable, arguing: "state governments are perfectly entitled to increase the royalties. The system has worked well in the past … the mining tax completely mucks it up." No doubt keen to shift focus away from Malcolm Turnbull’s criticism of his "direct action" climate change policy, Abbott predicted that "this is almost going to destroy the forecast surplus".

The Government disagrees. Julia Gillard has confirmed that adjustments will be made to infrastructure spending to Western Australia to "protect the federal budget". Martin Ferguson, who confirmed that the government would honour its deal with the mining industry, criticised the increase as a "short term grab for cash" which may be "to the eventual disadvantage of the West Australian community". Wayne Swan has disputed the numbers: the WA Government claims that the increase will represent $2 billion over the next three years but Swan argues that there is "a real doubt" as to the accuracy of this prediction.

In any event, as business reporter Michael Pascoe pointed out, the Commonwealth Grants Commission process adjusts monies given to the states against the revenue they raise themselves. Pascoe charges that Barnett has "wilfully damage[d]his own budget … to score a petty political point against Canberra, recording the most Pyrrhic of victories". This is politics-as-theatre; in the next act the Premier, a picture of outraged innocence, characterised Swan and Gillard’s remarks about infrastructure spending as a threat.

The dispute puts the WA ALP in a difficult position. Leader Eric Ripper stated rather vaguely that if the federal government "threatens infrastructure spending…that would show a complete lack of understanding of how politics in Western Australia works."

This stand-off has been brewing for some time, as illustrated by complaints about WA’s GST share: of each dollar of GST revenue generated within the state, it receives about 68 cents. In late March, in what was seen as an attempt to placate the mining states, Gillard announced a "full scale review" of GST revenue allocation. Barnett was not mollified. In April, he charged that Tasmania had "become Australia’s national park", asking "what right is there to simply take some of the spoils of the hard work in other states?" The presence of iron ore within state boundaries seems increasingly to be viewed as the result of some special virtue on WA’s part — rather than of luck and geography.

Barnett predicted in April that in the absence of positive change to GST revenue, there would be "almost a Tea Party situation where Western Australia … will just simply engage with Asia" and "simply not deal with the rest of Australia". Tasmanian Premier Lara Giddings warned that WA should be careful what it wished for: "If the market drops out of the mineral export area then WA will be floundering and, just like Tasmania needs support, they will need support." As political blogger Matt Cowgill noted last year, WA’s current prosperity has not always been the norm: it "spent most of federation living off transfers from the more populous states". Barnett’s words may come back to haunt him if China finds a more convenient quarry.

References to WA’s secessionist past frequently feature in commentary on state-federal disputes, but the political partisanship that has underpinned subsequent secessionist revivals is less often noted. The original secession push began in the 1920s. In a referendum coinciding with the 1933 state election, 68 per cent of voters favoured secession, although they returned the anti-secessionist Labor party to power. The movement foundered on the refusal of both the federal government and the British parliament to remove WA from the Commonwealth. Subsequently, secessionist aspirations have surfaced almost every time a conservative WA government has coexisted with a federal Labor administration.

In the early 1970s, mining magnate Lang Hancock (father of Gina Rinehart) sought secession from "the power grasping tentacles" of Gough Whitlam’s government and the Westralian Secession Movement unsuccessfully fielded a Senate candidate in the 1974 election. The movement seemed to fizzle out following the 1975 dismissal, although the Noonkanbah dispute also saw tensions rise between Sir Charles Court’s WA Coalition government and the federal Fraser administration.

Secessionism revived in the 1990s during the Keating government. Speaking at a conference of the conservative Samuel Griffith Society in 1993, then-WA Premier Richard Court (son of Charles) lamented that "the Federal Compact has come under severe strain at several points in our history, but never more than it is now … I often think that we need an embassy in Canberra more than many overseas countries do". Like Barnett, Court did not advocate secession, but argued that the Commonwealth was losing the "moral and legal authority to govern". This conclusion is echoed in the current Premier’s prediction that WA’s relationship with the rest of Australia would "progressively fall down, just through irrelevance".

Court resented what he saw as federal overreach, criticising the Keating government’s proposed Native Title Act as an attempt to "use native title as a weapon against the States". In an attempt to exclude the federal Act, the Court government legislated to extinguish all native title in the state. Its legislation was overturned for inconsistency with the Racial Discrimination Act, which rendered it invalid under section 109 of the Constitution. The Keating government lost in a landslide in 1996, and local secessionist fervour again abated.

And so the wheel turns: it didn’t take long for WA’s current government, elected in 2008, to clash with the Rudd and Gillard governments over plans for a federal hospitals takeover and a profits-based mining tax.

The combination of state parochialism, adversarial theatrics and political partisanship is, as ever, a potent one. And, notwithstanding its contemporary features, viewed in its historical context it is difficult to see much that is new about the latest dispute.


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