We already knew the Queensland budget has deteriorated massively due to the COVID-crisis, so today’s state budget update was not surprising in terms of the huge fiscal deficits it announced, $9.3 billion in 2019-20 and $13.1 billion in 2020-21. Nor was it surprising that total debt would increase to $102 billion by the middle of next year, which is $18 billion higher than was forecast in the mid-year update last December.
What I did find surprising, however, was that the government released such a woefully inadequate budget update, not willing to provide any estimates of budget aggregates beyond the current financial year. It’s terrible for transparency and the public debate that the state government has only published a 40-page update to explain and discuss the biggest fiscal deterioration we’ve seen since the Great Depression.
Yes, I accept it’s difficult to forecast, but the Treasury should attempt to do so, and no doubt has the resources available to do so. The Budget is a major output of the state Treasury, and it must have been pretty quiet in the halls of state Treasury if they haven’t had to produce a comprehensive budget this year. The Treasury could say that the estimates are highly uncertain and put margins of error around them.
Not having the federal budget yet is no excuse, as State Treasury would have its own models by which it could estimate GST receipts. This is a point Opposition Treasury spokesman Tim Mander more-or-less made to Steve Austin on ABC radio this afternoon. The state government was actually originally planning on releasing its 2020-21 budget in April, in advance of the federal budget.
We’re heading toward a state election, and there should be public debate on how the state government will eventually stabilise the debt once the economy recovers. The Government hasn’t set out a plan. Instead it has ballyhooed its gimmicky Queensland Future Fund which doesn’t actually materially improve the state’s financial position.
We need to see just how much additional debt the state government could be getting into over the next few years. The state government has committed to billions of dollars of additional spending in the current financial year and beyond, but so far it has provided limited information on what that means for the budget aggregates into the future.
Finally, I should say that the Backing Queensland Business Investment Fund, by which QIC will invest $500 million in small and medium businesses, could set an unfortunate precedent. It raises the prospect of QIC becoming a State Bank. What could possibly go wrong? Can anyone remember Tricontinental?
It must have been pretty quiet in Queensland Treasury in 1 William St this year, not having to prepare a full state budget.