CPD recommends endowment fund – forgets Qld has projected debt of $80 billion

The Centre for Policy Development’s new report All Boom, No Benefit? Why Queensland needs a new economic strategy ignores some important facts about the Queensland economy and contains some half-baked policy recommendations. The report is getting media attention because it criticises Queensland’s reliance on the resources sector (Queensland’s mining focus threatening wages, report warns), and raises concerns about future coal royalties, but it ignores the fact LNG exports will commence next year and there will be a big boost in royalties from production associated with those exports (see my post from last year Qld’s economic future bright if we look beyond short-term). Given our endowment of resources, Queensland has a comparative advantage in mining compared with other States, and I expect mining will be important to our economy for the forseeable future.

Another important fact the report ignores is that Queensland is projected to have
$80 billion of debt within the next few years. Hence I’m unsure where the surplus funds required to “Establish an endowment fund to manage renewable natural resources for the long-term”, one of the report’s recommendations,  are going to come from. It’s not like the Government has surplus cash to park in funds such as the one proposed. The fund may be worthwhile depending exactly on what type of natural resource management is proposed – the report is light on detail on this aspect – but a strong case would need to be made to divert money from other priorities such as health and education.

Regarding another recommendation in the report, I agree the Queensland Government should review its support to the mining industry to ensure it’s not unfairly advantaged relative to other industries. Indeed, as discussed last week (Scope to cut Qld Government industry assistance), I support a wide-ranging review of Queensland Government industry assistance.

Regarding the report’s final recommendation, “Convene a State Economic Summit to identify growth opportunities”, I fear this would be a useless, costly talk-fest and wouldn’t generate any useful economic policy outcomes. Hence I don’t support this recommendation.

I welcome the CPD’s interest in the Queensland economy, but it really needs to get a better grasp of important facts about our economy if it is to produce something of relevance to the Queensland economic policy debate.

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7 Responses to CPD recommends endowment fund – forgets Qld has projected debt of $80 billion

  1. Craig Wilson says:

    great post gene

  2. Jen says:

    I totally agree with the talk-fest comment – all they seem to produce is hot air.

  3. Katrina Drake says:

    Very good and timely post. I am firmly in the All Boom, No Benefit camp, and firmly agree Queensland needs a new economic strategy.

    Qld already has squandered our natural resources, to the detriment of future generations. The royalites from LNG are over-cooked, forecast by government to be in the order of $850Million per annum, now appear to be in the order of only $100-$200Million per annum. In comparison, the Queensland Health budget alone is $12,000Million per annum. The only beneficaries of Qld natural gas resources are the British and Chinese companies who actually own the resource.

    We are certainly not setting aside funds from the boom for future generations, or even for our own short-term future.

    Once the LNG starts flowing to world, we will see rising prices for energy, as we compete against world markets. There goes what remaining manufacturing industry we have left, no more aluminium smeltering in Australia. The scant royalties from our LNG resources will barely cover the increased electricity bill of our education and health facilities, let alone fund an endowment fund.

    I believe we are very re-miss as a generation not to have established an endowment fund.

    I think a strong case could be found to divert money from health and education. I am increasing concerned of the waste and rorts that exists in the health and education fields. We waste more than 1/2 our health budget on preventable disease. And I am becoming increasing aware of the rorts that exist in the “free government” training of VET-FEE Help are mind-blowing.

    I really enjoy your daily post – gives me something to think about, such as the urgent need to establish my own endowment fund, as we cannot rely on the government.

    • Gene Tunny says:

      Thanks for your comment, Katrina. That’s concerning if the LNG royalties forecasts are wildly inaccurate as you suggest. I’ll have to investigate.

    • The Happy Hillbilly says:

      It sounds as though they are expecting the situation of the last decade to continue, with prices for our resources continuing to simply boom year after year. It would be nice (for royalties) if that actually did occur with LNG but as you point out, the forecasts may be over-optimistic. Unlike the oligopoly situation in iron ore Australia enjoys being part of, it turns out that gas can be found under every other rock all over the world and we have some hefty competition in the LNG export market, such as the US. If the returns were to fail to match expectations, the volume of upstream work (pipelines and wells) would be impacted as well.

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