Labor must act to drive WA economy
This article was first published by The West Australian, p. 30, 23/10/2019
There are five immediate steps the McGowan Labor Government can take to stimulate the lacklustre WA economy.
Put a moratorium on the foreign buyers’ tax.
Reverse the migration status of Perth back to a regional city to underpin the international student market and get overseas students back to WA (along with their visiting families and friends).
Provide stamp duty reform such as relief for people downsizing.
Commit to payroll tax reform to stimulate our domestic economy and support real jobs growth.
Bring forward capital works projects and stop delaying infrastructure spending.
WA is experiencing a two-speed economy. Some sectors (predominantly mining) are doing well, while others (particularly retail and housing) are performing worse than the rest of Australia.
Windfall gains, estimated to be at least $4 billion over the next two years from high iron ore prices, the GST fix and asset sales, must be included in a package that includes economic reform, in addition to infrastructure spending to kick-start our domestic economy and create jobs.
A 1.1 per cent contraction in the State Final Demand last financial year reinforces the concerns of our domestic economy, where business investment has shrunk by 8.7 per cent.
It’s clear the WA housing sector is in crisis when Perth’s median house price of $480,000 is now lower than Hobart’s $483,000.
Poor policy decisions have damaged the economy and added to the financial pain of WA’s struggling households.
These decisions include unnecessary and excessive increases to household charges of more than $850 since the McGowan Government was elected.
One-third of WA homeowners are now struggling to make their mortgage repayments and almost one in 30 is at risk of repossession — by far the highest rate in Australia.
WA has a mortgage crisis with one in six or up to 125,000 homeowners owing more on their mortgage than the value of their property. Last financial year, WA had a record number of disconnections with 21,705 households having their power switched off for not paying a bill. That’s 5770 more homes than in 2016-17!
Changes to the regional migration status of Perth is another failed policy hurting the WA economy. The McGowan Labor Government failed to understand the consequences it would have on international education, tourism, retail and the housing sector when it introduced it in 2017.
International student numbers have dropped from 7.5 per cent market share in 2016 to 5.5 per cent this year. The loss of market share has stripped $750 million annually out of WA’s economy.
On January 1, the McGowan Labor Government introduced another poorly timed policy with the introduction of the foreign buyers’ tax.
The timing could not have been worse for the housing industry, with foreign buyer sales plummeting, crippling construction in the housing industry.
When introduced, the McGowan Government forecast the new tax to bring in $120 million over four years, however, it significantly revised its expectations down to $20 million in the 2019-20 Budget. In the eight months to end of August, the tax had raised just $8.3 million, while the total number of house and unit sales dropped 786 compared with the same period in the previous year.
The Government must seek support from the Commonwealth on the migration status of Perth going back to a regional city consistent with Adelaide and Hobart, and immediately place a moratorium on the foreign buyers’ tax until the market recovers.
Both decisions would have negligible impact on the Budget and will improve the bottom line through increased retail activity and increased stamp duty. Mark McGowan must also take other measures to support the housing market, such as stamp duty relief for people downsizing.
Labor must invest in economic drivers that underpin economic and jobs growth.
Now is the time to do it; Labor has the perfect window, with revenue streams massively exceeding Budget forecasts. Mr McGowan and Labor have run out of excuses.
Dean Nalder is WA shadow treasurer