Queensland Treasurer will deliver necessary though unpopular Budget

Today the Queensland Treasurer will deliver a State Budget that is necessary, but which is likely to be unpopular. It is necessary because getting State debt under control and restoring our AAA credit rating needs to be done now, to reduce our borrowing costs and to provide a buffer if we face a severe downturn in the future. But it will be unpopular, because the public remains largely unconvinced by the need to sell assets – the Strong Choices campaign has failed – and because it may include some reductions in pensioner discounts (Newman Government’s 2014 State Budget to cut pensioner concessions).

Pensioner discounts for rates, water and electricity bills and public transport aren’t ideal policy, because, broadly speaking, Governments shouldn’t interfere with prices, and basic economics tells us pensioners would be better off with an equivalent cash transfer (and probably a smaller than equivalent cash transfer) that they could spend as they choose. But there’s no doubt cutting concessions would hurt pensioners, and I expect the Government will be mindful of the impacts. Slight cuts to the rates and public transport concessions would likely be better from an equity perspective than cuts to the electricity and water rebates.

Finally, I look forward to seeing what economic forecasts underpin the Budget handed down this afternoon. I expect Queensland Treasury will have made some conservative economic growth forecasts consistent with those at the Federal level. This would make sense given the relatively low levels of business and consumer confidence in Queensland at the moment. Also, a big correction in the number of monthly residential building approvals, reported yesterday by the ABS, is a little concerning (see chart below).

buildingapprovals_Apr14

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