Workforce shortages the key roadblock to state government's 'Made in WA' future
Economic experts have endorsed the WA government's future-focused budget, but warned a tight labour market could be its biggest roadblock.
Thursday's state budget represented a shift in the government's focus, from transport projects and cost-of-living relief to infrastructure spending to kick-start diversification of the state's economy.
About 40 per cent of government infrastructure investment over the next four years is earmarked for so-called enabling infrastructure, like electricity transmission and ports.
"There's global economic turmoil," Treasurer Rita Saffioti said of the shift in focus.
"We need to make sure we protect Western Australia and help Western Australia grow into the future.
"We don't want WA to be collateral damage in global economic chaos."
Raymond Da Silva Rosa studies what drives corporate investment at the University of Western Australia and backed the government's plans to try and increase productivity across the state.
"We have a budget that's in surplus, we have an economy that's booming, we have a state government that has pretty much total control of the political agenda," he said.
"So all the pieces are in place for the government to take some considerable risks that other governments can't afford to."
One missing piece though, he said, is likely to be workforce — largely because the mining industry remaining successful leaves few workers for other industries.
Chief economist for the Committee for the Economic Development of Australia, Cassanda Winzar, agreed.
"There's a real argument to be had there for spreading some of the spend out and looking at what the biggest priorities are," she said.
"So looking at some of that infrastructure around the energy transition, but also really looking at our housing situation.
"If people can't get houses here there's not really going to be much investment and much desire for new industries to grow and develop here in WA."
That backing from the private sector will be critical to making the government's vision a reality — because without businesses changing where and how they spend money, the shape of the economy won't change.
Saffioti used an address to a business breakfast yesterday to encourage them to back the government's plans.
"We're here, ready to work with industry, making sure we can deliver on our commitments," she said.
Asked later in the day what would happen if businesses didn't change their spending, the treasurer said the combination of providing initial infrastructure and capital with long-term government purchase agreements was attractive to industry.
"I think there's a lot of excitement, and just speaking to a few people today, I think that there's a real willingness," she said.
Despite the broad support, Ms Winzar and Professor da Silva Rossa questioned the government's focus on manufacturing as a priority area, beyond a few niche industries.
"We're a very high-cost state, labour-wise, in a high-cost country," Ms Winzar said.
"Manufacturing across Australia is always going to be challenging.
"It's particularly challenging in WA when we've got competing demands for labour from industries such as mining."
Professor da Silva Rosa said there were strengths the government should try to leverage, which could be enhanced by boosting the quality of primary and secondary education.
"The services sector is the one that dominates, so it's more about high-end services, like medical services, computers and the like, engineering services," he said.
For its part, the opposition continues to argue payroll tax is an unnecessary roadblock to economic growth.
Payroll tax is paid to the state government by all businesses whose wage bill exceeds $1 million each year, and is expected to bring in $6.2 billion next financial year.
"WA businesses face a disincentive when they hire people," Shadow Treasurer Sandra Brewer said.
"Our payroll tax, particularly for small businesses, are the highest in the country."
She made the case alongside Jay Sidhu, who owns a land surveying business and said the tax had influenced his thinking as demand for his services grew.
"Me and my business partners have to consider it before we even think of growing," he said.
Ms Brewer said those costs were often passed directly on to customers.
"So what we're saying is, the government could help housing affordability by looking at all of the taxes on business, and seeing where they can reform," she said.
Asked at the business breakfast if a Labor government was ever likely to consider changes to payroll tax, Ms Saffioti said: "Every budget we consider everything."
"But also it's about the approvals process," she said.
"So we're working across the breadth of the economy to [see] what we can do in relation to supporting industry and business."
Ms Winzar said that was another area which needed to be looked at closely to attract investment to the state.
"What often happens in WA is we have really good small businesses and they're looking to expand, and they feel like they can't do it in WA because they don't have access to the right resources, to get the right labour," she said.
"The tax and regulation settings don't encourage them to grow here, so they leave either for interstate or overseas.
"We really want to encourage all those businesses to stay, to grow here, and other businesses to come setup here."
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