“When people talk about the resources boom being over, they underestimate the scale of the industry here… our production capacities have taken a structural step upwards.”

What makes Western Australia unique?

First and foremost, there’s the State’s size, at 2.5 million square kilometres. There are only eight countries in the world that have a larger geographical area than the State of Western Australia. As a comparison, it’s approximately the size of Western Europe, or more than three times the size of Texas. All that distance poses challenges, including different climatic zones. At the same time, there’s a population of just 2.6 million people, with 75-85% of that number living in the Perth greater metropolitan area. So, it doesn’t matter whether it’s in business, government, or in travel, isolation and distance are pervasive factors in all that we do.

As Premier, I have been very conscious of Western Australia’s economic history. We are very much a natural resource and commodities based economy, traditionally mining and agriculture. Gold mining dates back to the 1890s, but from the 1960s on, it’s been the development of other minerals and then natural gas. This specialisation around natural resources and commodities means that we are connected closer to Asia than any other part of Australia. Currently, Western Australia accounts for 41% of Australia’s exports, and yet we only have 11% of the population.

The latest cycle was evidently a super cycle brought about by a once off event – the rapid development and rise in living standards of hundreds of millions of people in China.

Commodity prices became exaggerated, and thus the downside of that upswing has also been exaggerated. Naturally we have seen a slowdown in investment, but I firmly believe that in two to five years we’ll see a resurgence. We have already seen the iron ore price recover substantially.

When people talk about the resources boom being over, they underestimate the scale of the industry here. It remains a A$90 billion a year industry, and the investment we have seen over the last decade means our production capacities have taken a structural step upwards.

WA produces 37% of world iron ore production – not world trade, but the total production worldwide. That’s alongside 12% of the world’s alumina, about 7% of nickel, 6% of gold and so on. We also have about 8% of liquefied natural gas (LNG), which will grow in the coming years, so we have significant world market shares across key basic materials.

All these factors make it clear to me that resources will remain the backbone of the State’s economy for at least another 30 to 50 years.

 

How have Western Australia’s finances been affected by the downswing?

The State’s finances are of course affected by the cyclical nature of resources. We derive substantial income from mining and gas, which have declined due to the slump in prices. As a knock on effect, revenues from other economic activity and related taxes declined because economic activity has declined.

However, the real problem we face, which is an Australian federal issue, is the redistribution of the goods and services tax (GST). That’s collected and redistributed under quite an old fashioned system called the Grants Commission. The Commonwealth Government gives the poorer States more money and the stronger States less money. We’re seen as a stronger State. If it were allocated on a population basis, however, we would be getting A$4.7 billion a year more than we are currently getting, which is huge. On top of that, the system lags behind economic developments, so there is a time lag effect. In effect this means we’re being penalized when our economy is actually in decline. It was all right when the royalties were super high, we could manage, but now it’s clearly not viable. My greatest frustration as Premier is that successive federal governments have failed to fundamentally reform GST.

 

What are the sectors to watch for growth and FDI?

Over the last few years, resources had centre stage, as my view was that we needed to capitalise on a once-off opportunity, which is the growth in demand coming from China. My focus now is on broadening the economy because new growth is going to come increasingly from sectors such as tourism, agribusiness and education.

Western Australia has always been a significant agricultural producer. Because we don’t have a large domestic market, most of our agricultural production is exported, whereas on the East Coast, a lot of it is consumed domestically. Grain is a big export, wheat, wool, historically, along with beef and lamb. Wine has seen more recent growth with Margaret River wine, which is not large in volume, but it’s a premium wine so it’s exported at the top end of the market. There’s a lot of growth in horticulture.

For the first time, we’re seeing investment into agriculture that’s coming from outside the agriculture sector. High net worth individuals are investing in the sector. We’re also seeing significant Chinese investment. Australia is seen as very safe food origin, and that’s attracting international investment.

The State Government has also invested in Stage 2 of the Ord River scheme. A very magical, iconic project, we funded infrastructure extending irrigation channels, while a Chinese company is developing the agricultural land.

In tourism, we are attracting more visitors, particularly from Asia, however not at the same rate as the rest of Australia. One of the reasons is that when the resources sector was at its peak, you could not get a hotel room in Perth. It was all top tariff, too, because you had all the petroleum companies and the mining companies distorting the market. We had not had a new major 5-star hotel built for about 25 years. The huge traffic of Fly-in, Fly-out (FIFO) workers in the resources sector also meant Perth Airport was incredibly busy with charter aircraft, so the tourism industry just got squeezed out. Mining was crowding out the sector.

Things are now changing quickly. We now have 2,000 hotel rooms coming on, and one of the other things that I’ve done as Premier is put big, public investment into our capital city. In the past, Perth was accused of falling behind the times. When you have a look at Perth now though, with Elizabeth Quay, Perth City Link, a new stadium under construction, there’s a lot happening. Perth is seeing more investment than it’s seen in 100 years, and that’s making Perth an attractive destination. I think our time zone and relative proximity and flight connectivity from Singapore, Jakarta, Kuala Lumpur and the general region are there to be capitalised on.

Another important growth sector is international education. There’s a huge demand for this. Students throughout Asia want to study in an English-speaking university. Also, international medicine, elective surgery, recuperation, all those sorts of things. The urbanisation, rising income levels and rising population of Asia mean two billion people are in the same time zone as us. That’s a big natural advantage.

 

How has Perth been developing as a tourism hub?

I think if I’m critical about the past, one mistake has been not focusing our tourism promotion strategy sufficiently. The reality is that due to airline connectivity, the number of arrivals from different markets and tourism infrastructure, most visitors to Western Australia arrive in Perth and want a city experience before they venture further afield into our regions. Moving forward there will be an increasing focus on promoting Perth as a destination and gateway to the State, particularly to Asia, because Asian travellers tend to come and stay in a city. They like city environments – shopping, restaurants, golf, casinos. I think 10 years ago there wasn’t so much to promote, whereas now, with more hotel rooms and destinations like Elizabeth Quay and the new stadium, there’s going to be more things to attract people. My focus, too, as a Tourism Minister, is on building up the tourism product around Perth. While they’re not on the immediate horizon, there could be attractions like an open range zoo and a spectacular national gallery for aboriginal art, as well as a variety of smaller projects. We’re also redeveloping the beachfront at Scarborough. Building the Perth package and promoting Perth as the destination, as Australia’s west coast capital, is something I want to place greater emphasis on.

Elsewhere, Margaret River and Albany are very accessible in the South West and have a pretty well developed tourism product. There is good accommodation with plenty of choice and lots of activities. When you get to the more remote parts of the State, though, it’s a long way to fly or to drive, so it can be expensive. However, there are also some amazing tourism drawcards. For example, there is the ancient aboriginal rock art in the Burrup Peninsula. For that, though, you’re not going to place a general advertisement on British television for example. You’re going to target the scientific community, the archaeological community, the universities. Similarly, biodiversity – wildflowers, the Fitzgerald River National Park – has to be promoted to particular interest groups. There are some great road trips too, such as across the Gibb River Road, for adventure travellers. We can target American four-wheel drive clubs for those, for example.

Even with Australian Rules football, when the new Perth stadium is built, we’re going to be promoting travel packages around sporting events. So, let’s say the Hawthorn Football Club, one of the big, wealthy clubs in Melbourne, says to its members, come and watch Hawthorn play the West Coast Eagles in Perth. They’ll fly to Perth and go to the game, then afterwards travel to Margaret River and spend a couple of days enjoying the wineries, gourmet produce, forests and caves before flying back to Melbourne. It’s also about seeing what is unique. Bird watching is one example where Western Australia has a natural advantage with places where you can see different species of migratory waterbirds. We’ll be targeting bird watchers, which helps attract people to the more remote parts of the State.

One area that has grown in the State very quickly, too, is cruises. Some of these go to Asia and back, some of them to Sydney, but there are quite a few that just go up and down the coast on short trips. The cruise sector will be a big focus for us; making sure we have the right port infrastructure and on-shore excursions to meet passenger needs.

 

Indigenous culture and art seems like a unique opportunity, how are you trying to capture it?

We want to develop a great national centre for aboriginal art. The iconic Australian aboriginal art is essentially from Western Australia, from the Kimberley, Pilbara and the central desert areas, so to build a centre that will be able to draw on that heritage will be incredible. We have a site on Elizabeth Quay that’s reserved for this. It will also tell truthfully the aboriginal story, the arrival of the Europeans – both the good and the bad.