baillieu resigns, page-16

Anyone heard of any projects in Vic that will provide ongoing employment?

http://www.heraldsun.com.au/business/denis-napthine-needs-to-act-decisively-if-he-is-going-to-push-victoria-into-a-growth-period/story-fn7j19iv-1226592754752

Denis Napthine needs to act decisively if he is going to push Victoria into a growth period

Infrastructure projects, such as the east-west road link, should be the focus of the new premier.


DENIS Napthine could not have chosen a more pivotal time to become premier of Victoria. The state is either in recession or perilously close to it.

Investment has stalled, the high Australian dollar is punishing Victoria's manufacturing and agricultural exports, unemployment is rising slowly and business and consumer confidence are far from inspiring.

So ignoring for a moment the politics surrounding his surprise appointment to the state's top political post, how can he pick up Victoria's economic growth rate?

Well the first item on the business wish list is stability.

Premier Napthine might not be able to do much about his razor-thin hold on government but he can make the most of it by insisting on absolute political and economic discipline by his ministers and by communicating his plans clearly and with authority.

In the short term that probably entails some very difficult decisions about making a clean break from the past, ejecting everyone tainted by the secret tapes scandal and reshaping the ministry into an effective and loyal team.

In the longer term it means casting a vision of a more productive and efficient Victoria that can thrive and prosper within the contraints of a high dollar and other federal fiscal and monetary settings it is powerless to influence.

Second on the to-do list is some decisive action to end long-running distractions so the government becomes proactive rather than reactive.

The most obvious distractions are on the industrial relations front with the two-year saga of the teachers' pay dispute being the most pressing target for a prompt resolution.

Building industry disputes are another millstone holding back progress.

With a fresh approach and the removal of past promises and dealings, they should be solvable with the caveat that, where possible, wage increases should be offset with efficiency gains.

The third item on the agenda is investment and revenue, and this will be the most crucial and controversial for the Government.

It is not widely appreciated due to its communication failings, but the Baillieu government has been one of the most financially disciplined in Australia - in some ways it was a victim of its own austerity push.

By being fixated on keeping a budget surplus and a triple-A credit rating, the Baillieu government tailored for itself a very fashionable but tight fiscal straitjacket, particularly as slumping tax revenues from the GST, property stamp duty and payroll tax were unhelpful, to say the least.

While the mining states have been cooking with gas (and iron ore, coal and a variety of other minerals) and raking in royalty revenues and the benefits of generally faster economic and employment growth, Victoria has been stuck in the slow lane of the two-speed economy.

A swag of previous Brumby government projects of varying quality have been running (Royal Children's Hospital, Peninsula Link and the Wonthaggi desalination plant to name a few) but as they are completed there hasn't been much to replace them.

The sort of skilled workers that take part in these projects are often mobile and move to where the work is, so the otherwise commendable budget austerity that Victoria has employed is resulting in the loss of skilled workers and the flow-on effects of their spending.

Fortunately for the new premier, there are tentative signs this trend is starting to reverse as consumption and housing spending are starting to turn upwards and take up some of the slack left by the looming slowdown in mining investment.

They won't entirely make up for the massive mining stimulus to the Australian economy but the positive moves on world sharemarkets and the fading into the background of the European debt crisis and US fiscal cliff should lead to Victorians gradually easing up on their own austerity measures and starting to invest some of their cash hoard on areas that attract state taxes.

An upturn in the domestic and commercial construction industry, which is a key employer, is a really important indicator to watch here, and removing any roadblocks in front of it should be a priority.

In other words, the Victorian economy might look sluggish at the moment but if it is bumping along the bottom and preparing for an upswing, Dr Napthine's ascension could come at a fortuitous time.

In this context the Government must consider whether it should channel a little bit of the US approach to a crisis rather than the European one and start to open the purse strings a little more and borrow, even if that puts at risk the much cherished budget surplus.

The key here is what the money is spent on, with infrastructure projects holding out the prospect of being a magic pudding that can create jobs, increase productivity and improve state government revenue.

The east-west road link is a good example, if it can reduce the travel times for goods and people and deliver some pump-priming to the economy at the same time, it could be a win-win all round.

The important point is that projects should remove bottlenecks and improve efficiency - a repeat of the wasteful pink batts and school hall spending is definitely not what is required, given that state government dollars are a lot harder to come by than federal ones.

It is even possible that infrastructure and other projects could be structured in such a way that they have a minimal impact on the state budget, particularly as Treasurer Kim Wells has been looking at some options for restructuring public private partnerships so that they can work in the current financial environment and still provide good value for taxpayers.

A final vital area for the new Premier is the quest for jobs and this is both the most difficult and important task.

Public sector spending can only get you so far and the private sector is the real engine of sustainable jobs growth.

Manufacturing jobs have been shrinking due to a long-running structural change and the harmful valuation and competitive effects of the high dollar, which is a particular problem for Victoria given our status as a manufacturing hub.

That structural trend is unlikely to reverse but the manufacturers that have survived and thrived so far are hyper-competitive should macro factors such as the currency swing in the opposite direction.

Similarly agriculture is primed to recover and you would expect the services sector to continue on its impressive growth path.

All told Premier Napthine has a tough task but with a combination of good luck and good management, not an impossible one.


cheers
B Rubes