Yesterday’s media release from the Queensland Premier and Energy Minister on the $2 billion Affordable Energy Plan appears to have been prepared without Queensland Treasury input, as it is very loose in its discussion of the budget impact. The media release notes:
The Palaszczuk Government will ensure Queenslanders’ power bills are pegged to average inflation over the next two years and cut $50 a year from bills as part of a $2 billion Affordable Energy Plan to provide cost of living relief.
The move will see all the dividends from Queensland’s publicly-owned electricity assets reinvested in an all-out attack on affordability, while Queenslanders wait for the Prime Minister’s proposed National Energy Guarantee.
But the dividends from electricity sector government-owned corporations (GOCs) should already be included in the budget forward estimates so, everything else being equal, the new elements of the Affordable Energy Plan will increase the State Government’s projected fiscal deficits and hence increase debt (see the fiscal deficits Treasury projected in the State Budget released in June in the figure below). The dividends can’t do double duty. They already go into consolidated revenue to help pay for all the government’s bills, and they aren’t explicitly earmarked for subsidising electricity prices.
Unless GOC dividends or other revenues such as coal royalties are higher than previously expected, the Government does not have any new money to spend. The Government needs to explain exactly where the additional money for its new subsidies is coming from. An early mid-year Budget update would be useful in this regard.
I suspect the State Government does have some additional money from resource royalty revenue to play with. If it does, it should be transparent about this, rather than pretending it is funding its new energy affordability measures through GOC dividends already factored into its budget.
Finally, it is sloppy to talk about the dividends being “reinvested” in this package. The bulk of the Affordable Energy Plan is a subsidy to power bills which I expect will be treated as a recurrent operating expense in the budget, not as a capital investment.
On these issues, also see:
Graham Young’s post Retailers not the problem Premier—you are
Nick Behrens’ post from July Is Qld Government dividend policy forcing up electricity prices and taxation by stealth?