New Qld Government faces big fiscal challenges

Many Queenslanders in the construction and engineering sectors will be disappointed by the capital spending plans of the likely new Queensland Government. Previously, there was some excitement at the prospect of a large boost to capital spending across Queensland, with $8.6 billion from asset leases to be allocated to infrastructure. But, with the likely demise of the current Government, that is no more.

To its credit, the Opposition committed to only relatively modest new capital spending in its election costings, but it may have simply deferred a problem. Currently there is declining funding allocated to capital spending over the Budget forward estimates (for 2014-15 to 2017-18), which I’ve adjusted (very slightly) to account for the Opposition’s election commitments.  I suspect that it will not be feasible or desirable for actual Queensland Government capital spending to decline over this period – even more so if our population growth recovers. That is, it is very likely the new Government will have to spend more on infrastructure than is currently provided for in the forward estimates.

Qld Govt capex

Other fiscal challenges for the Government include:

  • finding actual savings in advertising, consultancies and public service inefficiencies without compromising the quality of government administration and policy development; and
  • maintaining the tight control on expenditure growth that will be necessary to have large enough surpluses to start paying back $1.7 billion in debt each year from 2018-19.

The new Government may get some benefit over the forward estimates from the “hollow logs” the current Government had stashed money in for its election commitments, but this money won’t solve the long-term fiscal challenge of paying down Queensland’s debt.

I commented on Labor’s fiscal strategy and election costings on several occasions last week:

Black hole election – speech notes and slides

4BC Drive interview on election costings

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2 Responses to New Qld Government faces big fiscal challenges

  1. Jim says:

    Gene

    Good post, but I’m wondering what the major infrastructure requirements actually are. Projects like stadiums and alternatives to the Bruce Highway that were touted during the election campaign by both major parties are pretty dubious ideas. Doing nothing should always be an option, and if these are the genuine priorities of whoever finally makes up a government, then doing next to nothing is probably the superior option.

    As far as I’m aware there is excess capacity across the ports system; no need for more dams; and future rail infrastructure proposals deliver pure private benefits to a few mines (so no public money is needed). So where are the genuine infrastructure bottlenecks that really constrain productivity and competitiveness, and what public projects can be done to address these bottlenecks where their benefits genuinely exceed their costs?

    There will be a need for new investment to expand hospitals, schools etc to meet population growth, but most of the investment is likely to be pretty incremental.

    Concerns that the construction sector has about a contraction in activity from the forward estimates should not be a reason to spend public money on dubious projects.

    • Gene Tunny says:

      Thanks the comment, Jim. Great points. Definitely not a reason to spend money on dubious projects. We need rigorous cost-benefit analysis of any major infrastructure projects.

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