In my latest video, I review the economic news of the past week, including US GDP, the record high gold price, and Australian jobs and CPI data in this time of the COVID-19 second wave. Incidentally, I highly recommended you also check out Larry Summers’ latest interview on Bloomberg which I mention in my video.
Bill Bates and David Young from the Boot Brisbane group have started a new live-streamed podcast on creating a new state of North Queensland. Guests so far have included former Queensland Speaker John Mickel and federal MP Ewen Jones, and I was happy to be their guest on Wednesday night:
Yes to a North Qld State podcast
We had a good chat about the economic and financial issues associated with creating a new state, including whether and how the state’s current debt would be shared with a new state of North Queensland.
My previous posts relevant to the NQ state debate include:
My comments on NQ exit in ABC online story
Is North Qld under-funded by the State Government relative to the South East?
Townsville Bulletin report on funding feud: Brisbane economist “under fire”
Senator Canavan’s ambitious plan for a State of North Queensland
The old Burns Philp company building on Flinders St in Townsville.
The Brisbane south side COVID-cases and the Queensland Government’s declaration of greater Sydney as a COVID-hot spot are bad news for Queensland’s economy. Around the world, public health measures and public anxiety related to COVID-19 are causing huge swings in economic variables. Economic forecasting, always a difficult exercise, is even more challenging. University of Queensland Professor of Econometrics Rodney Strachan has recently recorded a thought provoking video on the Challenges of Forecasting in the COVID-19 Pandemic. I spoke with Rodney about the relevant issues in my latest podcast episode.
Cloister on the Great Court at the University of Queensland, Brisbane. Photo by Nick-D.
The Update on Queensland’s fiscal position media release from state Treasurer Cameron Dick last Thursday noted “over the 2019-20 and 2020-21 financial years, GST receipts to Queensland will be cut by up to $2.5 billion compared to our MYFER [Mid Year Fiscal and Economic Review] estimates.” I discuss this, and the long-standing issue of Vertical Fiscal Imbalance, in my latest video.
Related posts include:
ABC radio interview on Qld state debt & deficits update
Premier’s 2016 Lodge dinner remark to Turnbull highlighted Vertical Fiscal Imbalance problem
At the Parliamentary Inquiry into the Queensland Government’s economic response to COVID-19 on Monday last week, I called for the Government to publish its internal-use estimates of the state budget position and debt, so we don’t have to wait until the planned budget update in September (see my remarks). Thankfully, the Queensland Government released its estimates yesterday, in its Update on Queensland’s fiscal position media release, on the same day as the Australian Government’s more comprehensive budget update. I spoke with Bec Levingston on 612 ABC Brisbane radio this morning about the update. Bec then spoke with the state Treasurer Cameron Dick. Here is a link to the audio, which will only be available for a week or so (NB the segment starts at 6:40):
https://www.abc.net.au/radio/brisbane/programs/mornings/mornings/12473420
I reiterated several of the points I made to the Inquiry Committee, including the need to properly target assistance and ensure value for money, and for the state government to provide a long-term plan for eventually stabilising the debt-to-revenue and debt-to-GSP ratios.
The fiscal position update was disheartening, with estimated operating deficits of
$5.9 billion in 2019-20 and $8.5 billion in 2020-21. Note these are the operating deficit estimates, and do not include net capital expenditures. The estimated operating deficits imply overall fiscal deficits of $10 billion or more in 2019-20 and at least $13-14 billion in 2020-21. General government debt is expected to increase 36% in 2020-21 to nearly
$60 billion at the end of financial year. Total state debt, including the government-owned corporations as well, will be around $100 billion by mid-2021.
I’ll have more to say in future posts. Early next week I’m planning to interview Joe Branigan for his thoughts, so keep an eye out for that. Have a great weekend.
1 William St, the Tower of Power, the home of the Queensland Treasury and other agencies.
In 2017, Deloitte Access Economics estimated the value of the Great Barrier Reef at
$56 billion. You may ask, how could you even attempt to place a dollar value on the Reef? What techniques are used? Aren’t some of our environmental assets priceless? Or is some number better than no number at all? These questions are explored in my latest podcast conversation with Dr Boyd Blackwell on Valuing the Environment. Boyd is Principal of AquaEquis Consulting and President of the Australia New Zealand Society for Ecological Economics (ANZSEE).
Check out the show notes via your podcast player for relevant links.
Coral outcrop on Flynn Reef. Photo by Toby Hudson / CC BY-SA (https://creativecommons.org/licenses/by-sa/3.0)
Earlier today I chatted with Pete Faulkner from Far-North-Queensland-based Conus Business Consultancy Services regarding how Queensland’s regional economies have been impacted by COVID-19. Check out the recording of our Zoom conversation below.
You can download the slides we chatted about via this link:
Slides discussed with Pete Faulkner on Qld’s regional economies
Australian Treasurer Josh Frydenberg will hand down a mini-Budget this Thursday, and it’s coming just in time, given the growing concern over the spread of COVID-19 in Victoria and NSW. I recorded a video earlier today with some thoughts on the upcoming mini-Budget:
In the video, I mention UBS’s deficit estimates as reported by the ABC:
Why debts and deficits are here to stay
I also mention Grattan’s Recovery Book regarding the rate of JobSeeker assistance.
The Brisbane Times, in its article Film industry calls for more local support after Hollywood incentive, is reporting there is some dissatisfaction with the newly announced $400 million of federal government incentives to attract international film and TV productions:
Australian Writers Guild president Shane Brennan said the funding was a “$400 million giveaway to Hollywood” at a time when the Australian industry was bleeding out.
“It shows a total lack of faith in the Australian industry and Australian storytelling,” Mr Brennan said.
Legendary Australian playwright David Williamson expressed the same sentiment a couple of years ago when Queensland was chasing the Dora the Explorer production, with the ABC reporting at the time (Veteran screenwriter David Williamson calls for more local movies, as Queensland chases blockbusters):
Australia’s most prolific playwright says Queensland needs to produce more local films telling local stories, instead of continuously chasing Hollywood blockbusters.
I’ve long been critical of film industry assistance, as we appear to have fallen for the tactic Hollywood studios use of playing governments off each against each other, to the point where the local benefits end up being minimal and potentially negative. If we are to provide assistance, it would be better directed toward supporting genuinely Australian productions which have some cultural value, as I argued in my 2017 CIS paper on The Case Against Film Industry Subsidies. I can see some value in supporting the production of classic Aussie films like Mad Max or Picnic at Hanging Rock, but not Aquaman or Dora the Explorer.
Australian Writers Guild president Shane Brennan has said the federal government’s latest film industry support package is a “$400 million giveaway to Hollywood”. Photo by Paul Deetman, via Canva.
Henry Ergas and Joe Branigan have just had a new paper published by the Menzies Research Centre, COVID19: Getting Australia Safely Back to Work. Yesterday I interviewed Joe about the paper and you can hear our conversation using the player below:
Here is a sample of Joe’s comments:
…everyone would love to have elimination, but it’s just not realistic. And I think the Prime Minister said the same thing. Elimination is just not a viable option. You know, very rarely do corner solutions give you the right answer in public policy.
And I think the problem is that those who argued for elimination, and there are many that still do, have the wrong counterfactual in mind. They assume that the alternative is to do absolutely nothing. And they also assume that the true infection fatality rate is 1%. Which is what we originally thought it was all the way back in late January and early February.
So the argument goes something like, well, we need elimination to save 150 to 200,000 or 250,000 lives. We need stage four. We need to reseal our borders. Otherwise, you know, this human tragedy occurs. But I think that’s wrong because we’ve learned a lot more about the virus since January…
…So you asked me, What does suppression looks like? Suppression looks local. It’s that principle of subsidiarity. You’re responding locally. You’re investing your resources in tracking and tracing and quarantine. If there’s an outbreak, you jump on it. It’s reactive. It’s not preemptive. Because the cost is so high to stay in that siege mentality, that preemptive place, which is the elimination strategy.
Listen to the conversation for more great insights from Joe.
Also, check out Ergas’s interview with Menzies’s Nick Cater last night:
Queensland Economy Watch 