‘Reckless spending’: Cash handouts must stop to rescue Qld’s credit rating

Cash handouts like energy rebates will need to end and public service wages contained if Queensland has any hope of avoiding a financially painful credit rating downgrade.

Queensland Treasurer David Janetzki delivered a keynote speech in Brisbane. Picture: Supplied by the office of the Premier

Cash handouts like energy rebates will need to end and public service wages contained if Queensland has any hope of avoiding a financially painful credit rating downgrade, economists have warned.

It comes as rating agency S&P Global warned the state government will need to find a way to raise or save money if it plans to spend cash on election promises while covering cost blowouts — or risk putting “pressure” on Queensland’s AA+ rating.

Treasurer David Janetzki, in his first major speech since becoming Treasurer, conceded the LNP has likely inherited a credit rating downgrade from a nearly decade-old Labor regime.

Mr Janetzki has vowed to come up with a “safe and secure plan to get debt under control” and restore fiscal discipline.

While he has not detailed how he will achieve this, Mr Janetzki again refused to promise electricity rebates into the future.

The state’s first credit rating downgrade in 15 years would make it harder and more expensive for Queensland to borrow money against a backdrop of a massive infrastructure pipeline and population boom.

Brisbane City Council Lord Mayor Adrian Schrinner also flagged a credit downgrade would hit every council in the state, with every Queenslander to pay the price for “Labor’s reckless spending”.

Cameron Dick, the Deputy Leader of the Opposition and former treasurer. Photo: Steve Pohlner

Former Labor treasurer Cameron Dick refused to take any responsibility for leaving the new government a fiscal mess, saying he delivered record surpluses and stable credit ratings.

S&P Global analyst Anthony Walker said any additional spending, on new policies or cost blowouts, could weaken Queensland’s budget and increase beyond expectations.

“This could pressure our AA+ credit rating on Queensland, especially if additional spending is not offset by savings or revenue increases,” he said.

The LNP has backed itself into a corner after promising to lower debt, not bring in new or increased taxes, protect public service jobs, and so far promising not to cut any projects despite billions of dollars in cost blowouts.

Independent economist Saul Eslake said putting Queensland’s financial footings back in good stead without cutting operating spending, slashing infrastructure spending, raising taxes, or selling assets would be a “miracle”.

“Maybe they’re going to find a cure for cancer and single-handedly reverse the declining fertility rate … it would be a miracle of the same order of magnitude,” he said.

Economist Gene Tunny from Adept Economics said the LNP would need to get “creative” and search the balance sheet for spare funds, stop cost-of-living cash freebies like the $2.5bn electricity rebate and special grants for favoured industries like tourism or blockbuster filmmaking.

He said it was likely the new government would find a “clever way” to reduce the public service wage bill by not replacing “fat cat” bureaucrats as they leave or playing “hardball with public sector unions” to limit salary growth.

AMP chief economist Shane Oliver said it was clear the government was laying the groundwork for “cut backs in one form or another”.

Mr Janetzki said advice from Treasury in his incoming government brief was clear about a “heightened risk of a credit rating downgrade, that debt couldn’t be stabilised”.