We’re getting close to the point where we must respect the adage “no one ever kicks a dead dog” about the current Queensland state government. But it’s left itself open to criticism about its latest huge upward revision to state debt, well past what anyone would have expected.

You have to wonder how the rating agencies will interpret this. Will they start thinking about a credit rating downgrade? Also, you have to wonder how long the government has known about the debt blowout and whether it should have revealed it earlier. The figures that have been released to the Courier-Mail suggest big changes to the mid-year-update figures the government published four months ago. It can’t all be due to what is expected to happen in 2027-28, the new year which will be reported on in the coming budget.

The Courier-Mail reports gross government debt will reach $188 billion by 30 June 2028. General government debt will reach $128 billion, and net debt will reach $73 billion (compared with only $15 billion in the general government sector in 2023-24).

In the December mid-year budget update, the government projected total debt of $149 billion by 30 June 2027. At the previous rate of debt increase, you might have expected them to end up with around $160-165 billion of debt by mid-2028, but now they’re revealing debt could be $188 billion. That’s a big acceleration in the rate of debt accumulation. What is going on?

From what I can tell, it’s a combination of:

• huge vote-buying cost-of-living relief (e.g. electricity bill rebates) the government will offer in the upcoming budget;
• infrastructure cost blowouts; and
• the recent fall in coal prices (see chart below), which means the revenue upside I was hoping for in my previous post probably won’t occur – although I’d note the 12-month ahead futures price (12th position in the chart) has been much more stable than the price for contracts settling in the current month (1st position in the chart).

I accept state governments can get away with some debt to “borrow to build”, so to speak, but I will be very concerned if part of the debt surprise is borrowing for cost-of-living relief that gives us a net operating deficit. Borrowing to cover recurrent or operating expenses violates the so-called Golden Rule of Public Finance. You can read all about that, as well as about how everything started to go wrong during the Bligh government, in my 2018 book Beautiful One Day, Broke the Next.

Please feel free to comment below. Alternatively, you can email comments, questions, suggestions, or hot tips to contact@queenslandeconomywatch.com. Also, please check out my Economics Explored podcast, which has a new episode each week.