Queensland Economy Watch

One of the best bits of news in last week’s Queensland State Budget was the establishment of the Skills Commission, which according to the Education Minister, Geoff Wilson, “will examine economy – wide, across all major industry sectors, what skills are going to be needed for the whole Queensland economy in three to five years.”

That’s a big job in itself, given the well-known challenges in labour market forecasting.  Added to that there is an expectation in the community that the Commission will champion further reform of the vocational education and training (VET) sector, building on previous reforms which have boosted contestable training funding (i.e., training funding that private sector training organisations can compete for – through attracting students – against each other and with TAFEs).

If I were a policy adviser in the Education Department, one crucial piece of evidence I’d bring to the Skills Commission’s attention is the large variation across courses in the proportion of students who go on to careers related to their courses of study (see the paper Is VET Vocational? by Tom Karmel).

While people studying trades and technical courses tend to end up as tradies and technicians, for many other qualifications there is less of a direct flow on from the course to the actual job (e.g., many fashion design students don’t end up as fashion designers).  As Karmel notes, this may not be a problem, as many VET courses deliver useful training in generic skills.  Nonetheless, to the less optimistic, it may suggest the need for a significant reallocation of the training effort across courses in the VET system through an increase in contestable funding and flexibility.

Undoubtedly, these important reform issues will occupy the mind of the new Skills Commissioner, whoever that may end up being.  Peter Beattie, perhaps?  I hear he’s back in town.

It’s only recently that greater Brisbane has had an integrated ticketing system (the Go Card) for its public transport.  Initiatives such as integrated ticketing (and the SEQ Regional Plan) reflect a growing appreciation, across Australia, that there needs to be an integration of systems and strategic planning at the metropolitan (rather than the individual council) level.

The new KPMG report Spotlight on Australian Cities contains a useful guide to the state of metropolitan planning in Australia.  Brisbane ranks second to Melbourne in terms of performance against Council of Australian Governments (COAG) criteria for strategic planning frameworks and their implementation.  Adelaide, Perth and Canberra fill the third to fifth places, and Sydney comes in sixth, beating only Darwin and Hobart.

These rankings seem to make sense.  Melbourne has a reasonable history of metropolitan thinking, since the establishment of the Melbourne and Metropolitan Tramways Board in 1918, and SEQ has directed a lot of attention to regional planning in recent years in order to cope with population pressures (and the water crisis).

Some media attention has been given to the KPMG report’s call for a new Commonwealth Cabinet Minister responsible for urban issues.  This is a good idea, although it may be a role that Australia’s new Population Minister, Tony Burke, could take on, once he delivers his report on managing Australia’s population growth next year (assuming no change of Government).  Clearly metropolitan planning is a key part of responding to the pressures of population growth.

Finally, I’m unsure about the report’s recommendation that State and Territory Governments issue “infrastructure development bonds” to help fund infrastructure.  The Treasury Corporations of these Governments are already sellling bonds (i.e., borrowing money), largely to fund infrastructure needs, and I can’t see how stamping them as “infrastructure development bonds” would help the Treasury Corporations get a better deal from the major financial players who buy the bonds.  Still, with all the sovereign debt out there globally, which our State and Territory bonds have to compete with, it may be necessary to think creatively about how to fund infrastructure in the future.

Flicking through the Queensland Budget papers I was reminded that Australian State Governments aren’t fettered like their cousins in the US, with many US states forced by state constitutions to run balanced budgets.  In recessions, when tax revenues fall, balanced budget rules require many US states to cut expenditures, which is precisely the wrong thing to do in a downturn.

While you can legitimately debate the effectiveness of stimulus measures (e.g., new spending or tax cuts) in a recession, it’s pretty uncontroversial that you shouldn’t be cutting expenditures.  Luckily Australian State Governments can let their Budgets temporarily slip into deficit as tax revenues decline, so spending can at least be maintained on its previous trajectory.

With US state governments having to balance their budgets, you can end up with perverse fiscal policy – the negative stimulus from the state governments can offset any positive stimulus from the US federal government.  Prof. Alvin Hansen (Keynes’s biggest promoter in the US) argued in the forties that this “fiscal perversity” was a contributor to the duration and severity of the Depression.

Unfortunately, fiscal perversity may still afflict the US: Stimulus? What stimulus?

We can be thankful for Australia’s flexible fiscal policies and institutions.

Welcome to Queensland Economy Watch.  This site is dedicated to news & views on the Queensland economy.  This is timely for a number of reasons: the recent Queensland Budget which continues the effort to get Queensland’s AAA credit rating back, the plan for new urban centres in response to the burgeoning South East, and a recognition across Australia that Queensland is booming (e.g, see this weekend’s Financial Review, telling you to ‘kickstart your career’ in Queensland).  And this is not to mention the Resource Super Profits Tax, which of course may have significant implications for our State.  I’ll try to keep you up-to-date and informed on these and other key and emerging issues.  Thanks for visiting.