Qld Gov’t public service bonus demonstrates ongoing relevance of Beautiful One Day, Broke the Next

The Queensland Government’s $1,250 bonus for public servants, estimated to cost $250 million in total, is being poorly received outside of the public service. Many people consider that public servants are already well remunerated and that the state government still needs to get its debt under control. The cash splash demonstrates the ongoing relevance of my 2018 book Beautiful One Day, Broke the Next: Queensland’s public finances since Sir Joh and Sir Leo.

For instance, in my book, I discussed the importance of the public service voting bloc in Queensland:

Given there are over 250,000 people employed in the Queensland public service, the public service vote can be a decisive factor in state elections. Arguably, by increasing the public service to such a large extent during its first term in government…the Palaszczuk government has realised the importance of the public service vote for its own political survival.

The public service bonus is a vote buying exercise, rather than a genuine fiscal stimulus, as I suggested to Sarah Vogler, State Political Editor of the Courier-Mail, when I spoke with her yesterday. In her article Economists cast doubt on claims public service cash bonus will boost economy, Sarah writes:

Adept Economics and former federal Treasury economist Gene Tunny described the stimulus excuse as a “weak” one.

“It is certainly going to be a significant addition to the income of those public servants and they will spend a fraction of it,’ he said.

“But if they are worried about a downturn then that is not really going to stop it happening. “That’s going to be quite minor in the scale of things.

“It really wouldn’t do much to stop a deteriorating economy in my view.”

Note that I’m not advocating for a larger fiscal stimulus or any fiscal stimulus at all. Generally, fiscal stimulus is ineffective in smoothing out the business cycle.

Nick Behrens from QEAS and Dan Petrie from CCIQ also have some great comments in today’s Courier-Mail criticising the public service bonus.

I concluded Beautiful One Day, Broke the Next with the words:

I live in hope of an eventual return to fiscal discipline in Queensland, but it may be a long time coming.

Those words remain appropriate.

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4 Responses to Qld Gov’t public service bonus demonstrates ongoing relevance of Beautiful One Day, Broke the Next

  1. Keiran and Travers says:

    agree with you Gene.. How about spending $200M on a pipeline from Toowoomba to Warwick and Stanthorpe instead?

  2. Jim says:

    If there was one group of workers that is relatively more immune to the risk of losing their jobs at the moment, it is public servants.

    And because the payments will be taxable income; will go to a demographic with a relatively lower marginal propensity to spend than those genuinely in need of some cash (those on minimum wages and benefits); and are pretty small at the individual level (after tax); the economic stimulus impact will be negligible. Furthermore, because most public servants are based in SEQ, even less of the stimulus will go to the regions where it is actually needed.

    This is simply dumb economics, dumb fiscal policy, and dumb politics (after all how many public servants vote for the other side anyway?).

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