Saturday, May 01, 2010

What if Australia moved east? What if the Henry Review brought it about?

The wonderful Shane Wright in the West Australian:

It’s an autumn morning in 2015.

Prime Minister Colin Barnett is having an early coffee, reading the international version of The West Australian, before his mobile phone — on international roaming — rings.

It’s the Governor-General, the commander-in-chief, touching base about some planned naval exercises in the Southern Ocean where the WA Navy is likely to come close to the international boundary with Australia.

Though an exercise, it is all about the battle over access to southern bluefin tuna and the fledgling WA fishing industry as it battles against those established “over the border” in South Australia.

The Governor of the Reserve Bank of WA phones next. She warns the Prime Minister that another interest rate rise is likely to be signed off by the board later in the day to keep a lid on the housing sector which is continuing to roar along.

Fantasy, you say?

The idea of a separate Republic of WA died back in the 1930s, or with Lang Hancock, surely...
When Liberal MP Norman Moore raised the issue back in 2005, he was quickly howled down by members of his own party.

But what if there was the will, if we wanted to secede? Could West Australians afford to separate from the Commonwealth of Australia and strike out on their own?

WA has a long history flirting with the idea of becoming its own nation state. The preamble to the nation’s Constitution opens with the line: “Whereas the people of New South Wales, Victoria, South Australia, Queensland and Tasmania . . .” WA was not mentioned initially because of hesitations in our remote colony at the plan to join the Commonwealth of Australia.

Most famously, the people of WA voted overwhelmingly in favour of leaving the Commonwealth in 1933.

After a strong local campaign, 68 per cent of the 237,000 votes cast by West Australians were in favour of seceding. However, the nationalist government of Sir James Mitchell, which held the referendum, was defeated and in came the Labor administration of Philip Collier which campaigned against secession.

A delegation sent to Britain failed to sway a special committee to consider the referendum results, arguing instead that all Australians had to agree to WA’s secession — not just WA voters.

UWA historian Charlie Fox said the 1933 referendum and election result had a lot to do with the Great Depression. “It looks like a strong vote against Canberra for what was going on, but also a strong vote against the State government for how it had managed the Depression,” he said.

According to Associate Professor Fox, the feelings of West Australians towards secession ebbed and flowed over the years. In good times it retreated, but at the height of a boom or when the economy was doing it tough, those secessionist flames roared back to life.

Lang Hancock published his book Wake Up Australia in 1979, arguing WA could bankroll secession on the back of miners and wheat farmers. Even the argument for secession has changed over time.
“In the early stages, West Australian felt disadvantaged against financially by Federation, now the argument is WA would be better off without the rest of the Federation,” Associate Professor Fox said.

That’s the history of secession. But what of the finances? The WA Treasury estimates how much the State pays to Canberra every year. In last year’s Budget, it was estimated WA subsidised the Federation to the tune of a record $8.2 billion — the difference between what West Australians handed over to Canberra, and what Treasury estimated WA got back in the way of everything from infrastructure to social security benefits.

That worked out to be a subsidy per West Australian of $3832. The next largest subsidy came from NSW where it was estimated at $668 a person or about $4.6 billion. Based purely on those figures, it would seem WA is footing the bill for just about everyone else (excluding NSW and Victoria) with about $8 billion left over to cover the costs of being a nation state.

So what would you need? The most obvious cost would be defence. A country with a 13,000km coastline and valuable resources in deep waters off its most north-western boundaries would need a defence force, starting with a navy. We might like to think the SAS at Swanbourne will stay, but given the Commonwealth has a big financial stake in this (and most soldiers are not originally from WA), this important defence asset is likely to march out of the new nation back to Australia.

The assets held at Garden Island might be “gifted” to WA but the new nation would have to find the money to get those assets operational.

The most important of those naval assets are the six Collins-class submarines. Lethal as they are, they’re not much use in terms of immigration affairs or facing a flotilla of illegal fishers.

And the cost of running and crewing them is a constant problem. Little wonder Canberra is on its way to replacing the craft. Canberra spends about $22 billion a year on defence, with $4 billion on the navy.

Then there are the immigration costs that come with having a major border with Australia.
Some may be able to absorbed into the defence budget, but it goes to a wider issue — the cost of doing business in a nation state.

Curtin University economist Peter Kenyon said one of the biggest costs would be borne by businesses used to free trade with the East Coast. Free interstate trade is a key element of the Constitution. He said WA businesses would quickly find themselves paying new fees or facing extra red tape to do business with customers and other firms on the other side of the continent.

“I don’t think it financially stacks up because while everyone looks at the fiscal equalisation, they don’t look at all the benefits that flow from the federation,” he said. “That transaction costs for business would be very, very substantial, then you have to look at labour movement which would become an issue.

“And while we’re all talking now about our great economic future, we don’t look at how the Commonwealth subsidised WA in the first place and how if situations change, we could run into troubles into the future.”

There are plenty of examples of countries that can survive, even prosper, with relatively small levels of government spending. New Zealand and Singapore are good examples. But WA, at 2.5 million square kilometres, would be one of the world’s biggest countries. Australia, without WA, would retain its position as the sixth biggest country on the globe, while WA would be 11th.

And that may be part of the problem. Not just in defence, but in providing services to far-flung parts of the new nation — from Ningbing in the north to Augusta in the south.

While the 10 per cent GST would go, the new Republic of WA Government would need that cash — worth about $4.5 billion — and so would have to introduce its own value-added tax.

What about another cost of business — interest on loans?

The Reserve Bank of WA would oversee monetary policy settings and, conceivably, would have rates at different levels to those in Australia.

WA might gain the Commonwealth mint, but it would have to come up with its own currency unless it wants to follow the EU and have a common currency and interest rate setting with that of Australia.

Want to post a letter? Then you’ll be putting your tongue on the back of a Republic of WA stamp. Given Australia Post already reckons a 55¢ stamp doesn’t cover the expense of sending letters from the east to the west coast, expect an increase in your annual postage bill.

Much is made of the importance of the mining sector to the overall Australian economy. But mining as a share of gross domestic product is small.

While exports out of WA were worth $87 billion in 2008-09, much of that income (and tax revenue) flowed to overseas shareholders and government coffers in the home bases of multinational companies such as Shell and Chevron.

The national economy is worth $1.2 trillion, with much of that bound up in the retail, construction and manufacturing sectors.

For all we think about banks, the financial sector — centred in Sydney and Melbourne — employs more people, makes bigger profits and is a bigger domestic tax cash cow than the mining sector.
There are other costs, some of which are impossible to quantify.

While the Supreme Court of WA would replace the High Court, what would happen to Australian legal precedents? Would Mabo and Wik, for instance, flow through to the republic?

Welfare, a personal tax system (run by Canberra now), a bigger public service, even a tariff and import supervision system — all would need to be created and operated in a nation that would be relatively small as a global player.

Prime Minister Barnett would have sole responsibility for the nation’s hospitals and universities. Australia is a member of the G-20, representing the world’s 20 biggest economies. It has been this group driving the reforms in the banking sectors as a response to the global financial crisis.

But WA would quickly drop down the economic pecking, from part of the world’s 14th biggest economy to 50th — around the same size of Hungary or Egypt.

Even WA’s membership of the Asia-Pacific Economic Co-operation group may be an issue, given the new country would have no direct connection to the Pacific Ocean.

Despite all these financial impediments, those who believe in secession are not swayed.
WA Secession Movement secretary Wally Morris envisages a “brotherhood” of states that ditch Canberra altogether.

He said while there might be big financial obstacles in the way, that did not make secession an impossible dream.

“Whatever the financial problem if we break away, then we find a way to fix it,” he said. “I believe in self-sufficiency, so let’s look after ourselves and get away from Canberra.”

And what would happen to the Commonwealth of Australia if one of its member States departed?
Well, the Constitution does allow for New Zealand to become part of Australia.

A recent poll actually found a quarter of Kiwis supported the idea of joining in a trans-Tasman nation.


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