Labor mortgages state’s future on the plastic

The rising cost of healthcare to cater for an ageing population and fix problems such as ambulance ramping makes debt reduction difficult. Education spending, transport costs and building new infrastructure to solve the problem of major highways, such as the main road from Brisbane to the Sunshine Coast, also create serious fiscal challenges. That is all the more reason why governments (and oppositions aspiring to government) need to level with the public about the need to avoid populist, unnecessary handouts and spending.

Despite a $26bn windfall over the past two years from some of the world’s highest taxes on coal (the commodity despised by most of the Labor Party), Queensland, like Victoria, is in dire straits with mounting debt. Ten days before the state election, with the state’s AA+ rating in doubt and total government debt forecast to surge to $172bn by mid-2028, Premier Steven Miles and Treasurer Cameron Dick are showing no inclination or capacity to deal with the crisis. It is taxpayers who will pay the mounting interest bills, probably at the expense of service for future generations.

Coming hard on the heels of his ludicrous proposal for government-run petrol stations, and un-means-tested 50-cent public transport fares and $1000 electricity rebates, Mr Miles’s latest, reckless giveaway is the promise of free school lunches for all state primary school students. It is also un-means-tested as well as unnecessary, and unwanted by most families who know feeding their children is their responsibility. In Britain, free school lunches were a bad joke for decades, especially for the children forced to eat them, a leftover from the post-war welfare state. In Queensland, free breakfasts and lunches for students who need them are already available, some supported by not-for-profit groups.

Labor has already made $8.9bn worth of election promises, including opening 50 bulk-billing GP clinics, as Lydia Lynch and Sarah Elks reported in Tuesday’s paper. And Treasurer Mr Dick was upfront about where the money will come from: “Over the forwards, a little bit will be beyond the forwards, but it’ll be $8.9bn in additional borrowings.” As S&P Global Ratings analyst Anthony Walker says, Queensland’s AA+ rating was confirmed on the expectation that the budget would remain in cash surplus. But the rating would be at risk, he warned, if the government funded its commitments through borrowing.

In a resource-rich state, Queensland’s mounting debt spiral is testament to the irresponsibility of successive Labor governments. Once a hallmark of leaders and treasurers who took pride in sound financial stewardship, the state’s AAA credit rating was lost under the Bligh government in 2009. In the interim, only the one-term LNP government of Campbell Newman, from 2012-15, made its restoration a priority. In June 2013, Standard & Poor’s warned about the state’s “very weak budgetary performance”. Mr Newman and his treasurer, Tim Nicholls, set about doing what was necessary by cutting the public sector wages bill, mainly through attrition, and a practical plan of asset leases. If the process of paying down debt is to be achieved in the foreseeable future, that course, ideally, should be revisited. It won’t be. Fiscal discipline is anathema to the current Labor Party, unlike previous, responsible treasurers such as Keith De Lacy. And the LNP is too timid following Mr Newman’s ignominious defeat, mainly for unrelated reasons, in 2015.

In her first term, Mr Newman’s successor, Annastacia Palaszczuk, maintained a veneer of concern about debt, shovelling it from the government’s books on to state-owned power distributors Ergon and Energex. Her budget also raided $4bn from the surplus of the public service defined benefit superannuation fund, using half to pay off debt. As in other jurisdictions, the Covid pandemic from 2020 was enough for Queensland Labor to run up the white flag on debt reduction.

Fast-forward to June this year when Mr Dick, delivering his pre-election budget, made no apology for abandoning debt reduction. His focus, he admitted, was on handing out billions of dollars in cost-of-living relief measures. In a blatant euphemism for vote-buying, he said: “It’s very apparent to me, as it has been since the last budget, the cost-of-living pressures on Queenslanders and Queensland families remain significant.” But as the Reserve Bank has noted, high state spending adds to demand, contributing to inflation and keeping interest rates – the main financial pressure on households – elevated.

In October 2022, David Crisafulli correctly pointed out that “there are rivers of gold flowing in and yet our debt has increased”. He promised to take a debt reduction strategy to the election. “We will have a fully costed plan, not just with a debt reduction strategy but a service delivery strategy as well,” he told The Australian. On Tuesday, he would not say how much his government would have to borrow to fund its election promises, despite S&P’s warning. He has promised to reveal more details two days before the election. He must do better than the ALP, which, clearly, has washed its hand of the issue, an attitude that amounts to treating Queenslanders with contempt.