With less than three months to go until the Barnett government faces the voters in its bid for a third term, an important piece of the pre-election puzzle fell into place with yesterday’s release of the mid-year budget update.

The results offered the government a certain amount of relief in that more than $500 million had been shaved off the forecast budget deficit, as higher mining royalties off rising iron ore prices counterbalanced soft economic activity and a weakening tax take.

But the budget is still set to finish $3.4 billion in the red, leaving Western Australia as the only state projecting a deficit this year, and the outlook for later years has actually worsened slightly.

Nor is the budget balance the only black mark waiting to be put to use in Labor advertising during the election campaign: the state’s credit rating has twice been downgraded by Moody’s since the 2013 election, with net debt forecast to approach $40 billion by 2020.

Voters might not take much comfort in the fact, but the undeniable difficulties presented by the budgetary position have at least given rise to a meaningful diversity of policy options at the coming election.

The Liberals’ plan to finesse their shaky record after eight years in office is to blame the budget’s ills on Canberra, and make a virtue of the tough medicine that a third-term Barnett government will administer as it handles a crisis not of its own making.

The mid-year update offers a certain amount of ammunition on the former count, in that higher mining royalty revenue stands to slow the rate of increase in the state’s share of the GST take from its current 30 cents in the dollar to 66 cents in 2020, down from the 76 cents anticipated at the time of the budget in May.

On the government’s view, the only thing for it is a major asset sale — in this case involving 51% of electricity network operator Western Power, which it is hoped will raise $11 billion.

It’s a measure of the precariousness of the government’s political position that it’s prepared to wade into the political mire of privatisation, to which public hostility can only be intensifying if we’re indeed witnessing a backlash against the policy orthodoxies of the metropolitan elites.

Privatisation’s unpopularity has come through forcefully in the polling of Essential Research, which has recorded a particularly emphatic view that state government domains such as schools, hospitals, public transport and prisons are better served by public ownership.

A ReachTEL poll for The West Australian in October confirmed this view with respect to the Western Power sale, with only 24% recorded as being in favour versus 56% opposed.

Needless to say, Labor has opted to side with the many rather than the few. But it’s also continuing to base its pitch to voters in Perth around a vision of an expanded rail network, which has demanded a radical policy statement of its own to give assurance that it knows where the money is coming from.

A fortnight ago, Opposition Leader Mark McGowan unveiled a plan to take an axe to the public service, with the number of government agencies and senior executive positions to be cut by 20%, and the top 20% of salaries for such department heads as remain to be linked to performance indicators.

It remains to be seen whether voters will be persuaded that the pain of budget cuts can be confined to an apparently unproductive class of big salary fat cats.

At the very least though, Labor has inoculated itself against the familiar charge that it has nothing to offer but tax and spend.

For that voters can look to the Nationals, who have infuriated the conservative establishment by daring to propose a massive hike on the mining royalties paid by Rio Tinto and BHP Billiton.

Noting that the present rate of 25 cents per tonne has stood unaltered since its introduction half a century ago, the Nationals propose tackling the debt problem through the mother of all adjustments for inflation, bringing the rate to $5 per tonne and adding around $3 billion a year in revenue.

The policy maintains the audacious spirit of the Royalties for Regions scheme, which Nationals leader Brendon Grylls inflicted on the Liberals as the price of government after the 2008 election, causing a quarter of the state’s existing royalty revenue to be commandeered for regional boondoggles.

The mining industry has responded with scarcely less fury than when Kevin Rudd unveiled the doomed Resource Super Profits Tax six weeks before the end of his first prime ministership in June 2010, with the Chamber of Minerals and Energy blanketing free-to-air television with advertisements attacking the idea.

However, it may prove that voters today are less receptive to the viewpoint of the mining industry than they were at the peak of the boom.

Indeed, the spectacle of the Nationals being confronted by a powerful enemy may even confer some advantage as the party prepares to counter the elite-bashing narratives of Pauline Hanson’s One Nation.

Should the Brendon Grylls strain of populism prove successful in quarantining his party from the backlash in its regional strongholds, the confounding effect of One Nation could instead be limited to the larger regional cities and the struggling suburbs on the fringes of Perth.

A number of the seats that accommodate these areas are must-wins for a Labor opposition which, for all the government’s difficulties, still faces a complex challenge in piecing together the ten extra seats it will need to secure a majority.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey