Thu Nov 9

When Labor states don't dance to the Albanese government's tune

Written by Michelle Grattan, Professorial Fellow, University of Canberra

It’s helpful for the Albanese government to have all mainland states in Labor hands – but only up to a point.

This week we’ve seen the Queensland government bite back at federal plans to curb the national infrastructure program, while Victorian resistance to changes to the Murray-Darling water plan prompted Environment Minister Tanya Plibersek to lash out.

Infrastructure is always a vexed issue. The program is full of pork barrelling, whoever is in power. Even when that’s not involved, what to build and when it should be built is often contested.

In May, the government announced a 90-day review of the $120 billion infrastructure pipeline it inherited from the Coalition.

Infrastructure Minister Catherine King said projects had increased from about 150 to 800. The government’s aim was to reduce the number of projects (many of them small) and rearrange priorities.

High inflation, cost overruns and shortages of labour and materials are plaguing the program.

The political difficulties of abolishing or changing projects, often involving negotiation with states and territories, are obvious enough. Now they have become significantly worse.

The government has received its stocktake, and Treasurer Jim Chalmers says the overall cost of the program has blown out by some $33 billion.

Also, an International Monetary Fund report ^[1] last week said infrastructure projects should be rolled out at a “more measured and co-ordinated pace, given supply constraints, to alleviate inflationary pressures”.

Chalmers is pushing this message, but it’s not being received well in Queensland.

State Treasurer Cameron Dick was blunt. “Queensland is Australia’s growth state and we need more infrastructure, not less,” he said in a tweet ^[2]. “If infrastructure cuts are needed, they should be made to southern states with low growth and high debt.” (Fun fact: the electorate offices of Queenslanders Chalmers and Dick share a common wall.)

Queensland Police Minister Mark Ryan said ^[3]:

I’ve got a clear message for Jim. Jim’s a mate of mine. Jim, those projects better not be in Queensland.

The last thing the Palaszczuk government wants is for projects to be cancelled, slashed or delayed. It is in a particularly precarious position – it faces an election in a year’s time and will be fighting for survival.

Queensland has an obvious political self-interest in resisting infrastructure cuts, but there’s a national point too. With large numbers of migrants coming into Australia, the demand for transport and other infrastructure will be increasing, rather than decreasing. Whatever cuts and slowdowns are made will need to be well judged.

The federal government argues the existing pipeline is unrealistic and without change could not be delivered anyway. But even if the decisions about what to cut, scale back or defer are economically sound, in political terms they could store up electoral time bombs for the government.

Even minor and unworthy projects can be sensitive in marginal seats. Scrapping them could open opportunities for the opposition. Also, available funds for new projects presumably will be limited.

When the government finishes its negotiations with the states and the outcomes are announced, King will be the main minister defending the decisions.

As we saw in the row over the rejection of Qatar Airways’ bid for extra flights, she struggles when under pressure. She could find the task challenging.

The fight over the government’s water changes centre on its planned amendments to the Murray-Darling Basin plan.

The legislation, soon to be considered by the Senate, broadens the activities that can be funded and extends the times for delivery of water-recovery projects. Most importantly, it removes the cap on the federal government’s “buybacks” of extra water for the environment.

The Murray-Darling plan is always fraught, because the interests of upstream and downstream users and their governments differ. Nevertheless, Queensland, South Australia and New South Wales have signed on – although NSW has done so reluctantly.

But Victoria, where the Andrews government has built a close relationship with irrigators, has held out, defending its position on the basis of work done by Frontier Economics.

Its report argues that “previous water recovery has resulted in less irrigation […] putting the viability of major irrigation districts and the industries and communities they support under pressure”.

“Further water recovery from irrigators (buybacks and on-farm projects) will add to the impacts already being felt and undermine the ability of irrigation communities to plan for the future.”

Plibersek declared, in an interview with the ABC ^[6], that it was “extraordinary that we’ve got a Labor government using dodgy modelling to join up with Barnaby Joyce and David Littleproud”.

Victoria’s Water Minister Harriet Shing retorts: “This isn’t about party politics, and it’s disappointing to see it framed that way. We don’t apologise for standing up for Victorian communities and environments.”

But Plibersek has backing from Jamie Pittock, from the Australian National University’s Fenner School of Environment and Society. He says:

The Victorian government can usually be relied on to make decisions based on solid data. In the case of the Murray-Darling Basin, bizarrely, it has relied on low-quality consultants’ reports that exaggerate the socio-economic costs and ignore the benefits from water buybacks.

The legislation will come to a vote in the Senate this year, and there will be wrangling with the crossbench.

Assuming the legislation passes, the federal government can override Victoria and proceed with the buybacks of water for the environment. But it will still face the opposition of farming and irrigator groups, and some local communities.

It would be hard to find political observers who believe Peter Dutton can win the next election, due by May 2025. But there is increasing talk about the possibility that Labor, given it has a very narrow majority, could find itself in minority government. (Contrast a year ago, when all the talk was about Labor’s prospects for increasing its majority.)

Being pushed into minority is something Albanese – a senior figure in the minority Gillard government – would want to avoid at all costs. It would hamper the government’s flexibility to pursue its program, mean constant negotiation with crossbenchers including bolshie Greens, and encourage the Coalition to run maximum disruption.

The challenge of keeping out of minority increases the importance of the “ground game” in Labor’s marginal electorates. And it could make controversies over local issues – scrapped infrastructure projects, or unpopular new ventures including ugly transmission lines for renewable energy – potentially dangerous for the incumbents in those seats.