Queensland mid-year Budget update – Nine News interview

Katherine Feeney of Nine News Brisbane interviewed me yesterday regarding Queensland’s mid-year Budget update, which significantly downgraded Queensland’s fiscal outlook, largely due to lower coal and LNG prices in the forecast period. Katherine and the Nine team did a good job summarising the main points and issues. Here’s a link to the story:

Queensland economy struggling

Posted in Budget | Tagged , , , , , | 4 Comments

Boys under-performing at Queensland State Schools

A new ABS study on educational outcomes at Queensland State Schools confirms the importance of socio-economic factors in school performance, and also reveals a surprisingly large gap in NAPLAN performance between boys and girls (see chart below I’ve copied and pasted). More boys are failing to meet minimum standards than girls. The data are for 2011, so possibly the situation has improved since then, but I doubt it. The gap between boys and girls doesn’t appear to be a problem solely in Queensland, although the gap appears larger than at the national level (based on ABS data from the 2000s which suggests a 5 percentage point gap rather than the nearly 10 percentage point gap we see in Queensland on writing performance). The Queensland Education Department should further investigate this gap in performance between boys and girls and consider whether policy changes are required, such as single-sex classes, which have previously been successfully trialled in Queensland (as reported in the Courier-Mail).


Posted in Education | Tagged , , , , , , | 4 Comments

Budget blowout highlights risk of permanent deficits without major spending cuts

With today’s Mid-Year Economic and Fiscal Outlook expected to reveal a blowout in this year’s budget deficit from around $30 billion to $35-40 billion, the Commonwealth Government is right to be reviewing childcare benefits and the proposed paid parental leave scheme, as reported yesterday (Budget warning: Childcare and family payments explode by $5.6b despite budget cuts). As I’ve noted throughout the year, without major policy changes, there is a big risk the Commonwealth will end up in a state of permanent deficit. The Commonwealth’s spending policies are incompatible with its tax policy settings, which due to income tax cuts in the 2000s generate a smaller tax-to-GDP ratio than previously. To avoid a state of permanent deficit it is necessary to make unpopular cuts to Commonwealth expenditures, which is why I’ve been supportive of the GP co-payment and higher education deregulation, among other policies. My previous posts on the budgetary challenges facing the Commonwealth Government include:

Good Budget strategy, but a mix of good and bad policy measures

 ABC radio interview on the debt tax and paid parental leave

Grattan report shows need for permanent budget measures, not temporary debt levy

Higher education reform important in improving budget balance

Posted in Budget | Tagged , , , , , , , | 2 Comments

The compliance burden of work Christmas parties

Back in October, Chris Richardson from Deloitte Access Economics pointed out the large costs (up to $70 billion in total p.a.) that businesses are imposing on themselves and other businesses through internal rules, such as those designed to demonstrate the company is complying with safety, environmental or non-discrimination regulations (Businesses burying themselves in billions of dollars of red tape). In some (if not many) cases, the internal rules are probably unnecessary. Today I came across possibly a good example of this phenomenon – a Safe Work Method Statement alerting staff of an international professional services firm with an office in Brisbane CBD of the risks they would encounter on their way to the Treasury Casino for their work Christmas party, and how to avoid those risks (see extract below). For example, regarding “transit to function location”, “uneven footpaths” and “interaction with traffic” are listed as hazards, and staff are advised to “use pedestrian crossings” and “Review path of travel for trip hazards”. The company may fear getting sued by an employee if something occurs on the way to or at the Christmas party, but surely this is overkill?


Posted in Labour market | Tagged , , , , , | 6 Comments

G20 had only minor impact on Brisbane’s profile worldwide, suggests Google Trends

I was pretty skeptical about the long-term impacts of the G20 on tourism to Brisbane (e.g. see Link to ABC radio interview on G20 and Expo 88) and Google Trends suggests my skepticism was correct. While there was a small blip in Google searches for “brisbane” (or “Brisbane”) at the time of the G20 summit in mid-November, it was smaller than the spike in interest in Brisbane generated by late November’s super storm (see the first screen shot below showing search volume over the last 90 days; the blip after the “A” is over the G20 weekend, and the spike at the end of November is on the day of the super storm). And the G20 blip was much smaller than the huge spike in interest generated by the 2011 flood (second screen shot below showing monthly search volumes since 2004; the big spike is in January 2011).



Posted in Brisbane, Tourism | Tagged , , , | 4 Comments

Qld waiting for LNG exports to boost economic growth, as internal demand falls away

The first exports of LNG from Curtis Island off Gladstone are expected to occur later this month, and they can’t come soon enough for the Queensland economy, with our current economic weakness confirmed by State Final Demand estimates in yesterday’s National Accounts data (see chart below). The drop in State Final Demand (which doesn’t include exports) is due to the well-known drop off in heavy construction work associated with the resources sector. This is a big shock to our economy, and our successful recovery from it will depend a lot on how quickly LNG exports can boost economic growth and how much of the export earnings end up being retained in our economy. It’s unclear to me just how much Queensland will benefit at this stage. While there are jobs associated with the LNG exports, there are far fewer jobs than the jobs involved in the construction phase. And while the Queensland Government will capture some of the benefits via royalties (some $1/2 billion a year), large shares of the profits associated with the export of LNG are likely to flow overseas or interstate. So, even though Gross State Product will boom due to LNG exports in the next couple of years, the actual impact on employment and incomes of Queenslanders may be less exciting.


Posted in Macroeconomy, Mining | Tagged , , , , , , , , | 2 Comments

Privatisation scoping studies should be released to inform public debate

If it hasn’t already been sent, I expect an email will be sent around Ergon Energy today decreeing that all whiteboards must be erased after meetings, after the embarrassing disclosure of privatisation planning to union officials via a whiteboard (see the Brisbane Times article Ergon privatisation notes discovered on whiteboard). The incident raises an issue I’ve touched on before: the amount of information available in the public debate on privatisation, which alas is less than necessary to have a properly informed debate (e.g. see my post from October Strong Choices plan mostly good policy, but light on detail of budget impacts).

The Government could make a large contribution to the quality of public debate on its proposal to lease out assets by releasing the scoping studies that were prepared by investment banks and corporate advisers such as Bank of America Merrill Lynch and Lazard. At the time of commissioning these studies last year, Treasurer Tim Nicholls noted “their findings will form the basis for a considered and mature conversation with Queenslanders about the future of these businesses.” But I’m unsure this considered and mature conversation has occurred yet. Not having seen the scoping studies, it’s hard to know to what extent their findings have entered the public debate.

The Government will not release the scoping studies to the public because it is claimed they are commercially sensitive. Certainly some aspects could be, particularly market soundings, where the advisers have tested the potential appetite of different investors. But a lot of parts of the scoping studies wouldn’t really be commercially sensitive – although, of course, they may be politically sensitive. I’d particularly like to know whether the scoping studies (or any other commissioned studies) contain an assessment of current inefficiencies in the different Government-owned businesses such as Energex and Ergon, and what steps could be taken, such as shedding excess labour, to improve the businesses. Information such as this would be of great interest to communities in regional cities such as Townsville and Gladstone, which may be impacted by efficiency measures.

The Government could release the scoping studies with truly commercially sensitive information blacked out. The commercial sensitivity defence for not releasing the studies seems dubious to me, particularly when you consider the major Government businesses being privatised, Energex and Ergon, are monopolies in electricity distribution with no competitors who could gain market advantage from the disclosure of sensitive information.

So the Government’s defence must depend on the risk that disclosing information in the scoping studies would result in lower bids from potential lessees of the assets. There is possibly a risk of this, although I’m sure any bidder would be well-informed by a number of consultants who are highly experienced in the operations of the relevant Government-owned businesses. So I think the risks arising from releasing the scoping studies are low. In any case, it is in the public interest for the studies to be released, so we can have a better informed debate on the benefits and costs of leasing out assets.

Posted in Budget, Energy | Tagged , , , , , | 2 Comments