My colleague Nick Behrens from QEAS was quoted in yesterday’s Financial Review regarding the need for new Queensland Treasurer Jackie Trad to restrain State Government spending growth, and he has made related comments in his latest newsletter. As is well known, the state public service blew out in the Palaszczuk Government’s first term, with the government breaching its own fiscal principle that the public service would grow no faster than the population, and employee expenses have exceeded budget forecasts (see chart below). As such, it’s probably unsurprising Queensland now has a new Treasurer.
Arguably, the major risk to the state budget continues to be health spending, which accounts for nearly 30% of the budget. Health spending has been growing much faster than spending on other purposes. In 2016-17, Queensland Health controlled expenses grew by 9.9%, compared with growth in Education controlled expenses of 5.5%, for example. And health has experienced large variations between actual and budgeted expenditures in recent years (see table below for Queensland Health controlled expenses). In 2016-17, Health full-time equivalent (FTE) employees ended up at around 83,700, compared with an originally forecast 82,614 FTEs.
Queensland Health Consolidated controlled expenses, budgeted and estimated actual figures
|Budget year||Budget ($M)||Estimated actual ($M)||Variation ($M)||Variation (%)|
With the ageing of the population and the increasing prevalence of people with complex health needs, there is continuing strong pressure on the health budget which the new Treasurer will need to watch very closely. Her job won’t be made any easier by existing state government policies, including (1) no forced redundancies, (2) generous nurse staffing ratios in hospitals and (3) above market wage increases for the public health sector.
I am looking forward to the 2017-18 Mid-Year Fiscal and Economic Review, expected to be released next week, to see how Queensland Government expenses over 2017-18 are tracking relative to budget forecasts made in June. Also the revenue numbers are of great interest. MYFER should reveal a substantial upward revision in royalty revenue over the forward estimates. But the government will still face a huge challenge in keeping its expenses under control and demonstrating it has a plan to pay down debt over the medium-term.