As the Queensland Budget bad news (revenue write-downs, super raids, etc) had already been released by the Government, there was not much to get excited about yesterday afternoon, or so I thought. Then I had a look at the Government’s fiscal forecasts and was very surprised that it is forecasting such unbelievably low growth in expenses, only 2.9% per annum over the four years to 2019-20, which would imply growth of no more than 1% per annum in real terms over the period. Compare the expenditure growth forecasts with the historical data and you will see how heroic they are (see the first chart below based on Budget data). And note the health expenditure forecasts seem particularly optimistic (see the second chart below based on data from the Budget and Queensland Government historical health expenditure data reported by the ABS).
The low expenditure growth forecasts are necessary because the Government needs to claim it is maintaining an operating surplus over the forward estimates. The Government claims it can achieve the unbelievably low expenditure growth because:
“The Government continues its commitment to expenditure control, with new expense measures announced since the 2015–16 Budget being partly funded through expenditure reprioritisations. In addition, a new fiscal principle has been introduced to maintain a sustainable public service workforce. The overall growth in public service full–time equivalent employees, on average over the forward estimates, will be aligned with population growth.”
The Government still needs to demonstrate its commitment to expenditure control. With the recent blow out in public service numbers and employee expenses (over 7% growth in 2015-16), it is difficult to take such a commitment on faith. I suspect expenditure growth will be much higher than currently forecast over the forward estimates.