Strong Choices plan mostly good policy, but light on detail of budget impacts

finalplan

The final Strong Choices plan has arrived, and, as I commented yesterday, I’m mostly supportive of it. However, I would rather more of the lease proceeds be used for debt reduction rather than being allocated to infrastructure funds that could be used for popular – though economically dubious – infrastructure projects in marginal seats (e.g. the Townsville Super Stadium).

While the policy in the plan is mostly good, the plan itself is light on detail and I still doubt the Government has the evidence and arguments it needs to win the debate. For example, the Government has not released any forecasts and projections of the budgetary impact of the policy, claiming that the earnings of government businesses are uncertain so it can’t produce any reliable estimates of earnings forgone when the assets are leased out. When I mentioned this to 4BC’s Ben Davis yesterday afternoon on air, he thought that was pretty odd and surely Treasury must have some idea. I agreed with him, and I would be very surprised if the Treasury hadn’t produced estimates of the budgetary impacts of the plan. If it has, these estimates should be released to inform the public debate.

With around one-third of the lease proceeds not going to debt reduction but to other uses (e.g. infrastructure funds), it’s possible that the budgetary impact of the plan could be negative, because the Government wouldn’t save enough in interest to offset the loss of dividends from the Government-owned businesses. If so, it’s even more desirable that all of the lease proceeds should be allocated to debt reduction.

In addition to chatting with Ben Davis on 4BC yesterday, I also chatted with Pat Hession of ABC Townsville radio, and with Steve Austin and his other guest John Quiggin on Steve’s morning show on 612 ABC Brisbane:

Economists debate Government’s asset lease plan

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