Productivity push from Qld Govt needed after living standards growth stalls

Queensland Treasury econocrats should start investigating measures to improve our productivity performance, after ABS State Accounts data released on Friday confirmed a big slowdown in living standards growth over the last decade or so – measured, roughly I admit, by real Gross State Product and Income per capita (see charts below). This is not just due to the mining slowdown, given that mining was still a major contributor to the economic growth that did occur in 2013-14 (see Pete Faulkner’s post Mining & construction led Qld GSP in 2013-14 in which Pete explains why real Gross State Income actually fell in 2013-14). Instead, in my view, much of it probably reflects the slowdown in productivity growth that has occurred (across Australia) due to a slower pace of economic reform than in the eighties and nineties. Hence, a renewed focus on productivity by all levels of Government would be welcome.

GSP&GSI

RelativeGSP

Regarding what the Queensland Government should do, it should:

  • continue with its red-tape reduction agenda (e.g deregulate retail trading hours and the taxi industry and push for local governments to relax heritage and other development restrictions), and provide further information to the public on its progress so it can be kept accountable, and
  • continue with its proposed leasing out of State assets, but use the proceeds wisely – i.e. avoid wasting Government money on vote-buying infrastructure investments in regional areas, such as the proposed Townsville Super Stadium.

On the taxi industry, I’ve been very pleased that the Transport Department is turning a blind eye to Uber, because Uber use appears to be growing rapidly and is posing a big threat to the protected positions of Yellow and Black & White Cabs.

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10 Responses to Productivity push from Qld Govt needed after living standards growth stalls

  1. Jim says:

    Gene

    I agree with the need to tackle the productivity agenda again, but we need a better measure than GSP per capita (or similar). Focusing on narrowly-defined measures of economic activity can easily steer you away from sensible long-term policies.

    But what factors might explain the stagnation of growth in Queensland? Are they endogenous and something we can tackle by changes to policy, or are they exogenous? In the case of Queensland, I think it is probably the latter over the past few years. Perhaps the Queensland results are actually really good given the structure of our economy and the economic state of many of our trading partners. Comparisons with NSW and Victoria as evidence that Queensland is going backwards are a bit misleading as both of those jurisdictions have very different economic structures.

    I suspect some of the specific examples you have raised won’t make much of a difference (extended trading hours, or Uber), but they won’t do any harm either.

    Changes to planning and heritage laws might have a negligible impact on the housing industry, but it is really just encouraging more capital to be tied up in non-productive investments? If anything, it possibly reduces investment capital available for investment into projects that might actually enhance overall productivity.

    Some of the other red tape / green tape cutting exercises appear to be more about reducing environmental or safety requirements, rather than making the regulations and the economic signals they provide “efficient”. They are two distinctly different things. Too often regulatory reform goes something like this…. Industry A lobbies for lower environmental or safety standards because they reduce profits. Government responds by cutting back on requirements and states they have saved the industry millions (usually at an unmeasured cost to health and safely, or the environment etc).
    This sounds more like efficient rent seeking by industry than serious regulatory reform to me.

    • Gene Tunny says:

      Good points, Jim. I wouldn’t necessarily lower environmental or safety standards. But, with the massive number of regulatory requirements that OBPR has reported, surely there must be a way to streamline regulations and have speedier processes.

  2. Katrina Drake says:

    80% of the state drought declared, and consecutive days of record +40 temperatures in Central Queensland might go some way to explain declining productivity.

  3. KT says:

    I think that the Qld economy will do better in 2015. the Asset sales (leases) coupled with the royalties from the LNG projects should see some more cash in government revenues and less debt

  4. Katrina Drake says:

    Judging by the bombardment of government advertising recently on Asset leases, and no waiting health guarantee – I think there must be an election around the corner. I can see a lot of the money raised on selling assets is about to wasted on excessive health spending, trying to undo the sickness caused by obesity and tobacco, and not used to pay down debt.

    • Gene Tunny says:

      Yes, they’re certainly in election mode, but hot tip is an end of February election.

    • Jim says:

      Katrina

      If you have a look at documentation on leases and the Agricultural Green paper being developed, it looks like the State might be divesting (at least indirectly) out of profitable assets and recycling the capital into more dams for sugar. That has to be the investment equivalent of an own goal….

      • Gene Tunny says:

        Great point, Jim. That’s why I always thought it was better using all the privatisation proceeds for debt reduction. At least you get a return from that in terms of lower interest payments. There’s a big risk of the Govt funding unproductive investments, particularly given the election context.

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