David Janetzki warned to cap LNP’s public service spending

S&P says the Queensland Crisafulli government must rein in public service costs or risk losing its AA+ credit rating amid tense wage negotiations with the state’s 271,000 public workforce.

Treasurer David Janetzki. Picture: Steve Pohlner

The Crisfaulli government has been warned to cap public service costs or risk a credit rating downgrade amid pay negotiations with the Queensland teachers and the broader state workforce.

Standard & Poor’s issued the stark warning alongside a reaffirmation of the state’s AA+ credit rating, but said a downgrade might be possible should government spending on the public service and record infrastructure commitments face cost overruns.

“Successfully containing operating expenses will be crucial to Queensland maintaining a ‘AA+’ credit rating; otherwise, the improvement we project in the state’s operating position may not materialise,” Friday evening’s note read.

The first-term Liberal National Party government is in the ­middle of a round of pay negoti­ations with Queensland’s public service, with new deals for all 271,000 employees to be struck by mid-2026.

The government has agreed to a suite of bonuses and sweeteners totalling more than $200m for the state’s police, nurses and firefighters on top of the budgeted state wage offer, which locks in a 3 per cent pay rise in 2025, followed by an increase of 2.5 per cent in 2026 and 2027

An annual increase of 3.8 per cent in employee expenses has been budgeted over the next four years. Some economists have said the cost overruns in bargaining negotiations would mean the hiring of new staff would need to fall below the rate of population growth in order to stay on track.

QTU members marching during the teachers strike across the Victoria Bridge, August 6, 2025. Picture: Tara Croser.

Queensland Treasurer David Janetzki said the newly established Queensland Government Consulting Services would help bring down the state’s employee expenses. “The budget and estimates highlighted the savings already achieved by flattening the trajectory of consultants and contractors; QGCS is now fully operational and working to achieve a further slowing of Labor’s exponential growth,” he said.

Talks with the teachers’ union have stalled in conciliation before the Queensland Industrial Relations Commission, after 50,000 teachers took to the streets in Aug­ust in the occupation’s first strike in more than a decade.

It is understood the union has not received a formal offer from the government since July, despite agreeing not to take industrial action while in negotiations.

The Crisafulli government’s first budget projected state debt would hit a record $206bn by the 2028-29 financial year.

S&P said Queensland’s budget position was “very weak” compared to other states.

Independent economist Saul Eslake said by the 2028-29 financial year, Queensland’s public sector would be running cash deficits of 3.5 per cent of gross product, the highest in the nation behind Tasmania. However, the state’s net debt will still be lower than Victoria.

“As bad as Queensland’s position is, it’s not as bad as Victoria’s,” Mr Eslake said. He suggested S&P may have been reluctant to downgrade Queensland’s rating to AA, putting it on par with the Victorian economy.

“Maybe they felt they just couldn’t put Queensland on the same rung as Victoria, which is probably fair enough.”

In the near-decade after Labor’s defeat of the Newman government in 2015, Queensland’s public service wage bill ballooned by more than 75 per cent.