State economic mismanagement
Wednesday, 27 February 2008 10:00
Dr FLEGG (Moggill—Lib) (12.00 pm): In recent weeks we have seen the Premier and the
Treasurer admit to Queenslanders what we on this side of the House have been warning about for some time, and that is that the state budget is now shrouded in dark clouds. Last week in the Financial Reviewthe Premier said that we face a tough economic environment and that means some tough decisions.
This morning we heard the Treasurer quoting from the Queensland economic review. The reality is, as he has said, that the Queensland economy is booming—employment, wages, real estate. That means booming payroll tax, booming stamp duty and booming state government revenues. It is not the tough economic climate that the Premier referred to in the Financial Review that threatens Queensland; it is the poorly managed, poorly executed budget strategy of recent years that is threatening us in this state.
The forward budget estimates recently had to be revised from $52 billion of debt in 2010 to $55 billion of debt. We have seen the government now very belatedly acknowledging that its budget is in trouble. In fact, it took a warning from Standard and Poor’s that the enormous extent of its debt was going to severely limit its budget before the government itself even seemed to realise or seemed to acknowledge it.
What we have seen in Australia and other Western countries in recent times is a lot of free and
easy money in the private sector—a time when one might think that a government would be
encouraging the private sector whilst it had access to very cheap money to participate in public
infrastructure and the like. But, no! What we have seen is this government go on a borrowing binge of tens of billions of dollars and leave its budget in the precarious state that we see it today. Economics 101 tells us what happens when we borrow and spend at the top of the boom when resources are scarce, skilled labour is scarce and materials are scarce. We now have a situation where the free and easy money in the private sector has gone for the time being, and we have seen that affect companies like ABC Learning, Allco, MSS and others.
But what do we see now that the private sector’s access to funds is greatly diminished and the
cost of those funds has gone up astronomically? We see a government that has finally woken up to the fact that it does not have any financial capacity and that in actual fact its $10 million a day in interest is going to be a crippling burden. So we now see it talking about going to the private sector to fund PPPs in schools. This is an extraordinary thing to be doing at this stage of the cycle.
What are the reasons that a government would go to the private sector to fund a PPP? We are
great supporters of PPPs in economic infrastructure, and it will be greatly to Queensland’s detriment that we have not seen them coming through over the last four or five years. But a government goes to the private sector to build a PPP, firstly, if it needs to access the efficiency of the private sector—in other words, the government cannot run its schools efficiently—or if it wants the private sector to carry a commercial risk that it does not think taxpayers should be paying. A PPP in schools with the government as the client is not going to carry any commercial risk. Private investors would have to borrow those funds at far higher interest rates than the government would be able to borrow those funds for.
What we are now seeing is this government telling Queenslanders that they have to tighten their belts at a time when the government’s revenue is unprecedented and it has been increasing in double digits, many times the rate of inflation, but it has managed it incompetently. It has allowed the debt to blow out, not in the tough times but in the good times.