Former Queensland Government Finance and Transport Minister Rachel Nolan (currently Queensland Executive Director of the McKell Institute) provides some great insights into managing government budgets in my latest Economics Explored episode EP96 Managing Government Budgets. For example, here’s Rachel on the need for treasuries or finance ministries to keep a close eye on government spending:

Treasury would like to argue that they keep a pretty close eye on agencies spending all the time. I think you can always keep a closer eye on it and I think governments are just so big that I think you need to run them, both as a minister and at a public service level, you really want to kind of keep your finger on the pulse all the time. There will be something bubbling along that government has been doing a little bit unnecessarily, because that’s just what it’s always been doing.

A good way to uncover all the questionable things government is spending money on is to every now and then run a Zero-based Budgeting exercise for the whole government, something Rachel mentions the Beattie Government’s first Treasurer David Hamill did in his first year, when Rachel was working for him as an adviser. Here’s how Rachel tells the story:

When I was quite young, I worked for a former state treasurer, a very smart guy called David Hamill who was a Rhodes Scholar and a very good treasurer. He ran, and I think it was the last time it happened in Queensland, a zero based budgeting process. So what happened was Labor, my party, had been re-elected after a period of time out of government. This was in about 1998…the budget wasn’t in terrible shape at the time, but we wanted to, frankly, really get into the guts of it.

And so David required agencies, as a new treasurer, he required agencies not to run through that standard budget process…but in fact to front up and justify everything they did. Now, that’s terrifying for agencies. And it’s a huge body of work. But I think it’s a very good thing for a new government to do…

Frankly, we got a lot of agency resistance. As you might know, not everybody was all that excited about this proposition. But it is only through doing that deep dive from time to time – now, you can’t do it every year, it would be too disruptive for the business of government, and it’s simply too much work – but you do need to get into the guts of it from time to time. It was a really good thing to do.

Zero-based Budgeting is a great idea we should try once again in Queensland. Thanks heaps to Rachel Nolan for her excellent insights and stories. I hope you enjoy our conversation.

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