The mid-year Queensland budget update Deputy Premier-Treasurer Jackie Trad released on Thursday was one of the most interesting in a long time, and I was called on a few times for media commentary. For instance, I’m quoted in the Weekend Australian by Sarah Elks and Michael McKenna (Queensland Treasurer’s $5bn super grab a budget gimmick):
A former federal Treasury economist has labelled Queensland Treasurer Jackie Trad’s debt reduction plan a “gimmick” as latest figures show borrowings now equate to more than $15,000 for each resident of the state.
I note that “It’s a political solution, not an economic solution.” The Government appears to believe its so-called Future Fund, which is just a relabelling of funds it already has, will help convince ratings agencies the Government has a plan to eventually pay down its debt. It’s possible but not very likely this will be the case, in my view. Check out the paper for more commentary.
As anticipated (e.g. in my post from Monday last week), big falls in coal prices since 1 July (e.g. see chart below) have led to a write-down in expected revenue of hundreds of millions of dollars, a reduction of $643 million in coal royalties in 2019-20 alone. If it weren’t for the extraordinary $715 million in budget savings identified by the $10 million PwC razor gang, the operating budget would have gone into deficit. (Incidentally, that would be a 70X ROI from the razor gang, so we should ask why the Government didn’t have a thorough efficiency review earlier?)
I’m keen to see more details of the razor-gang-identified savings to see how solid they really are, and I’d also like to see what the final budget outcome is next year before getting too excited about this. The state government hasn’t had a great record of sticking to its expenses forecasts and keeping its expenses under control in recent years, as I discuss in chapter 7 of my book Beautiful One Day, Broke the Next.
Have a great weekend and I’ll be back next week with some more analysis of the budget and economic update.
The big fall in coal prices since 1 July has slashed $643 million from Qld government revenue this financial year.