Moody's Place Queensland on Notice as Credit Downgrade Concerns Gather Pace: CCIQ
CCIQ Chief Economist, Dr Marcus Smith said the Moody’s analysis effectively falls into line with market economists and industry groups that have urged the government to aggressively tackle the state’s debt.
“Small businesses are effectively footing the bill for an expanding public service through five new taxes since the Palaszczuk Government came into power whilst not addressing Queensland’s rising debt levels.
“The government is talking about fiscal responsibility, but is simply pulling out the State’s credit card to pay for new spending measures when revenue remains volatile at the mercy of the resources industry.
“The government should be steering the Queensland economy, not driving it, especially at a time when Queensland businesses are tightening their belts as profits are being squeezed - this is clearly out of step with community expectations.”
“The thing about the government’s spending spree is that it is effectively robbing Peter not once, but twice, to pay Paul as it must also cover the interest bill.
CCIQ notes that the policy options available to government to bring down debt are limited to asset sales and the fact the state raises little more than half of its revenue (Queensland raised 53% of its own revenue with the remainder from the Federal Government transfers – see chart below)
“The imposition of taxes and levies on the small business sector are inefficient and don’t incentivise the private sector to invest.
“Whilst leasing and asset sales are unpalatable politically, the opposition to public assets sales is not a particularly reasonable one; especially when one considers that utilities and infrastructure assets are ideal assets for superannuation funds to hold, and that is the only legitimate way in which these assets will actually become owned by the public.
CCIQ following the Moody’s analysis restates its concern that the government must exercise restraint in its growing staffing levels, which are effectively paid for by the private sector.
Dr Smith said the current public service wages represents an increase to recurrent expenditures by $7.1bn from when the Palaszczuk government assumed office.
“Public service wages are recurrent expenditure – and pushing the state’s wages bill $7.1bn higher than it was in the Liberal-Nationals’ last year in office is only going to end in pain when numbers again have to be reduced.
“Hope is not a strategy and both sides of politics have little road left to keep continually kicking the proverbial can down,” Dr Smith said.
While acknowledging the composition of securities within the debt portfolio is critical to analysis of state debt, CCIQ notes that on the basis of $83 billion, a crude estimate of the additional cost from a seven basis point differential between AAA and AA+ credit rating amounts to $58.1 million annually.
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Media and Communications – Economy and Government
Chamber of Commerce and Industry Queensland
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