States across Australia borrow to build – my recent state debt commentary

I’ve been talking a lot about Queensland state debt lately, including with the Infrastructure Association of Queensland’s Funders Taskforce on the morning of Friday 19 July. The main points I made were as follows.

  • Queensland’s gross state government debt, on its way to $90 billion in 2023, is high, but other states are catching up (and NSW will surpass Queensland) as they “borrow to build.” Queensland’s relative position improves over the budget forward estimates, even though its own metrics (e.g. debt-to-revenue ratio) get worse.
  • There is an important distinction between general government and government-owned corporations’ (GOCs’) debt, as the GOCs typically earn revenue from their debt-financed investments that can help service their debts, a point John Quiggin has made frequently. Broadly speaking, half of the state’s debt is owed by GOCs. Of course, in Queensland, we need to note that we’ve had GOCs make some dubious investments in the past (e.g. desalination plant, recycled water scheme), and that the current government shifted $3-4 billion dollars of general government debt on to the GOCs a few years ago.
  • Because Queensland had a long period of sound financial management up until the mid-2000s, the state government’s defined benefit super liability is fully funded, and the government consequently has $30 billion+ in investments which should be considered in assessing the state’s financial position, as is done when we use the net debt measure. Queensland looks a lot better on the net debt measure, although this measure is deteriorating too over the forward estimates.
  • Finally, in my view, we shouldn’t be complacent about the gross debt, as ratings agencies such as S&P and Moody’s consider our gross debt when deciding on the state’s credit rating. Also, if interest rates one day increase from their historic lows, debt servicing would make a much bigger impact on the state’s operating budget (as maturing debt is re-financed at higher interest rates).

Following my discussion with the IAQ Funders Taskforce, my Research Assistant at Adept Economics, Ben Scott, prepared some slides to illustrate the points I made:

Interstate debt comparisons

We’d welcome any comments and suggestions regarding the slides. My aim is to expand on them in a paper on interstate debt comparisons later this year.


The night before my discussion with the IAQ Funders Taskforce, I participated in an Australian Institute for Progress panel discussion with Professors Tony Makin and Judith Sloan. It was streamed on Facebook Live but apparently the audio wasn’t great, alas:

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