Weak Attempt by Major Parties to Fix State Finances
Labor and the LNP have saved the biggest disappointment for the last days of this election campaign.
When it comes to state finances and debt, the major parties have again shirked the task.
Neither party put up a credible plan to bring down Queensland’s debt burden, and this tells the business community we shouldn’t be confident that they can meaningfully repair the budget. Both have made a token gesture to cut debt levels, in the case of Labor redirecting funding from other sources and smacking us with $491 million in new taxes over the next three years.
The Palaszczuk Government has managed to deliver a net operating surplus for several years now, but public-sector debt has ballooned by 40 per cent since the start of the decade, mainly because the government has used borrowed money to make capital purchases.
The projections in the 2016/17 budget showed debt levels were expected to rise by $8 billion to $81.1 billion by 2020/21. Following the latest election campaign commitments, both of the major parties have pushed debt reduction into the “too hard” basket, pledging minuscule debt reductions for 2020/21.
Sluggish State Growth
The latest state accounts showed Queensland has grown slower in the past year, lagging behind the other eastern seaboard states. Weaker growth puts the breaks on job creation and weakens business confidence and puts even more pressure on the state budget. Whoever forms the next government, they will be keen to see the economy speed up.
The Government’s failure in fiscal discipline leaves the state in a risky position. As the debt grows, so too does the amount of interest we have to pay. In the latest financial year, interest costs reached $1.7 billion or 3% of all spending. This means less money available for essential services such as health, education and police.
The debt hole also means Queensland has less chance of fighting off future economic downturns.
Recovering the state’s AAA credit rating is essential to help restore business confidence.