Queensland State Budget – What the numbers mean
Most people understand the basics of financial management.
You make sure enough is going in to your bank account to pay for what is going out of your bank account.
As anyone knows, when you have more going out than coming in, you have a problem.
In simple terms, this is the situation that the Queensland State Government finds itself in.
According to the recent Commission of Audit, Queensland is expected to earn $43 billion in 2012-13.
At the moment, Queensland is projected to spend nearly $48 billion in 2012-13.
This results in a shortfall of $4.9 billion, taking Queensland’s gross debt to $64 billion. Unless the Government curbs spending, this figure could blow out to $100 billion by 2018-19.
In other words Queensland cannot pay its way.
There are several reasons for this, but the reality is that such a level of shortfall is not sustainable as an ever increasing debt has impacts upon the State Government's ability to invest in projects and infrastructure and to operate key frontline services.
Queensland’s debt is currently unsustainable.
The Government has been ‘living beyond its means.’ We are now faced with the problem of not having enough money to fund critical infrastructure that is needed to cater for the rapidly expanding Queensland population. The only way to address this chasm is to consolidate our debt and control Government spending.
The sooner the Government gets back on track, the sooner the benefits of a healthy budget will flow through to business and the general community.
A strong Government budget means increased investor confidence in Queensland. This means more jobs, better infrastructure to accommodate our growing population and better service delivery.
AAA Credit Rating
People often hear talk of ‘credit ratings’, but what does this actually mean?
Government and corporate credit ratings are not dissimilar to personal credit ratings, though on grander scale. Credit ratings express an opinion about the borrower’s ability and willingness to repay money that it owes. AAA is the highest possible rating.
Queensland no longer has a AAA credit rating which means that Queensland is paying a higher rate to borrow money than other states who have maintained a AAA credit rating. This means that it is more expensive to borrow money to fund projects and the money Queensland has already borrowed costs more to pay off.
Because of the loss of the AAA credit rating the Queensland Government is paying a whopping $570,000 per hour just in interest, not even scratching the surface of the $64 billion we actually owe!
That is over $13 million per day. Imagine what could be done to help business, schools, hospitals and services with an extra $13 million per day
When you have high debt levels, a worsening credit rating and a significant budget deficit, remedial action must be made to balance the State's books.
There are three ways in which this can be done:
- Increase taxes to the equivalent of $1,000 per Queensland resident per year
- Cut costs and attempt to find efficient ways of operating government services.
- Sell assets to fund debt repayment
At CCIQ we are supportive of the State Government’s efforts to deliver on its promises to return Queensland’s AAA credit rating by addressing the Government’s debt levels and putting Queensland back in a position to achieve a budget surplus.
It is clear that option 1 is not realistic. Business, workers and families cannot afford to pay more in tax to support and rescue the State’s finances. Nor should they be expected to.
We believe that this should primarily be delivered through a reduction in costs and an increase in efficiency. Efficiencies in the State’s finances can be achieved through cutting unnecessary red tape and consolidating Government expenditure. CCIQ is strongly supportive of the State Government’s efforts to address this ongoing problem.
The sale of assets is a contentious issue and rightly so. At CCIQ we are cautiously supportive of asset sales, however only if the revenue generated is used to clear debt. Assets must not be sold, as was the case under the previous Labor government, to protect public sector wages and jobs.
However we are also keen to remind the State Government that following the short term cuts to achieve a balanced budget, plans must be in place and investment strategies outlined to grow the 4 pillars of the Queensland economy: mining, agriculture, tourism and construction.
For more information on CCIQ’s recommendations to the State Government, have a look at our State Budget Submission here.