Queensland Economy Watch

I laughed out loud when I opened up a copy of the costings of the current Queensland Government’s election commitments and it reported that its $4 billion plus of commitments have practically zero “Net Impact” because it will be borrowing an additional $4 billion of money to pay for them, as well as tapping into unallocated funding it hasn’t used yet (see snapshot above). Here’s what my good friend and former Australian Treasury colleague Joe Branigan has to say about the costings:

Labor’s costings document doesn’t meet basic standards of public financial management. It simply says that ‘we borrowed X, and spent X’. But the point of publishing your costings is to show the impact on those important public finance metrics – the net operating balance and the fiscal balance, and net debt and gross debt, in the general government sector and non-financial public sector. Those eight very critical indicators tell us whether the public finances are being managed well (i.e. soberly, efficiently and transparently) and in the best interests of Queenslanders. What Labor has produced is almost meaningless, especially the headline figures that mix up recurrent expenditure and capital investment.

The other thing the so-called policy costings has missed in terms of their impact on the headline budget indicators is accounting for foreseeable parameter changes over the next four years. This is the fundamental problem with Labor not releasing a budget – we simply don’t know the expected increase in public service employees, the wage bill, capital spending etc. But we can be sure that those numbers will increase over time in nominal terms. That’s why an accurate accounting would identify both the policy changes and parameter changes over the budget period. In other words, you would be able to add your policy costings to your existing budget to see the bottom-line impact. Without a budget, these costings are essentially meaningless.

The best case the Government can make for its absurd near-zero “Net Impact” is that the $4 billion of additional borrowing for election commitments was announced in the COVID-19 Fiscal and Economic Review it released in early September and the spending was accounted for in the Government’s full budget forward estimates which the Treasury would have prepared, but which were not published in the update. Recall the Government only published a forward estimate for 2020-21 and not for the financial years out to 2023-24 which the costings go out to. Perhaps that is how the Government would justify its near-zero net impact measure, but on its face it looks absurd. Yes, budget deficits and additional borrowings are defensible given the COVID-crisis, but the Government can’t pretend borrowing an additional $4 billion to fund its election commitments has practically zero “Net Impact”. Perhaps I’m being pedantic, but the line item should at least read “Difference” (i.e. between additional spending and funding/borrowing) rather than “Net Impact”.

Finally, as has been widely reported, the election costings also incorporate some wishful thinking about $1 billion plus of efficiency/productivity gains in Queensland Health. I told Bill McDonald on 4BC earlier today that it’s a bit unclear how these productivity gains will be achieved. Based on the Treasurer’s interview on Bec Levington’s ABC Mornings show this morning, the Treasurer appears to want our hospitals to work its existing resources harder so it can get more procedures done and get more activity-based funding from the Commonwealth. I told Bill he should speak with the heads of the Health and Hospital Services and doctors and nurses to get their thoughts regarding how much capacity they have to work harder. Let’s hope we get some further information from the Government regarding how the efficiency dividend to be applied to Queensland Health will be achieved.

Update: you can now download a full copy of the costings: