Queensland Budget 2017: Public service wages threaten bottom line

STATE Labor’s reversal of a key Newman government measure now threatens to blow the Budget — and possibly Queensland’s credit rating.

Treasurer Curtis Pitt insists the projections do not give an accurate picture.

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THE cash-strapped State Government will have to impose a public service hiring freeze for two years to avoid blowing its expense forecasts and risking a credit rating downgrade.

Analysis of Treasurer Curtis Pitt’s Budget projections has revealed the $1.2 billion extra forecast for employee expenses until 2018-19 would be soaked up by pay rises.

The employee cost crunch has been exacerbated by the Labor administration’s public service spending spree.

An extraordinary 15,000 full-time-equivalent positions have been created in the past two years. The hiring spree was a reversal of the slash-and-burn policy of the previous Newman government.

Above-growth hiring deals locked in for nurses and teachers mean the Government could be forced to cut jobs elsewhere to meet its projections.

Former federal treasury official Joe Branigan said the Government’s claim that it would keep overall expenses growth at 2.1 per cent on average for the rest of this decade was unfeasible.

“Remember that this 2.1 per cent needs to not only account for wages growth, but also the growth in the number of public servants,” he said.

“In my view, this is an impossible expenditure growth trajectory.”

Campbell Newman gained infamy for public service cuts while premier.

However Mr Pitt insisted analysing projections of individual years did not give an accurate picture, and the Government would ensure public service growth matched population over the long term.

The analysis shows an extra $728 million, or 3 per cent, growth in employee expenses has been budgeted for in 2017-18.

At average employee costs, this would allow an extra 1076 employees after accounting for the Government’s 2.5 per cent annual wage rise policy.

However only $508 million, or 2 per cent, growth in employee expenses has been allowed for the following year.

After wage rises, the Government would be forced to cut about 1000 full-time-equivalent positions to meet its own projections, leaving public service numbers at a two-year standstill.

Rating agency Moody’s warned a failure to keep spending within forecasts could put pressure on Queensland’s Aa1 rating.

“A weakening in government resolve to control spending and reduce cash deficits… could result in downward ratings pressure,” it said.