Queensland Treasury’s new Economic and Fiscal Challenges report reiterates the huge challenge ahead in paying down debt and restoring Queensland’s AAA credit rating, which isn’t a likely prospect this decade. The projection that debt levels will stabilise at around $80 billion in a few years’ time and then increase to $120 billion in the 2020s is plausible given trends in government spending, particularly on health services (see chart above from the report).
That said, I doubt we’ll ever see State debt at $120 billion, given it assumes current expenditure and revenue trends, and the Government at the time will have the opportunity to prevent debt from blowing out further. The Treasury projection is a bit like assuming a ship’s captain sees an iceberg ahead and simply lets the ship run into the iceberg without attempting to steer it away. Either the Government will cut expenditure, raise taxes, or sell assets to reduce debt, as flagged by the Treasurer (Queensland Treasurer flags increased taxes and fewer services, as well as asset sales). I’ve previously commented on how asset sales are necessary and desirable: