Queensland budget ‘built on sand’

Economists warn the Palaszczuk Labor government needs to find a better plan to pay off its ­ballooning debt.

Queensland Treasurer Cameron Dick. Picture: NCA NewsWire / Dan Peled

Economists warn the Palaszczuk Labor government needs to find a better plan to pay off its ­ballooning debt, which is set to hit $127bn within three years.

Queensland Treasurer Cameron Dick claimed a $9.7bn reduction in net debt when he handed down his second budget on Tuesday – with the reduction based on a revaluation of the state’s Titles Registry.

The Titles Registry has been revalued at $8bn, twice what it was worth last year. Its returns will be split up, with $6bn dedicated to the Debt Retirement Fund, which operates like a mortgage offset account.

Another $1.8bn will be used to bring forward construction of social housing, set up a path to treaty and a carbon reduction fund.

Gene Tunny, a former federal Treasury official, said Mr Dick had “soared to previously un­attained heights of state budget creative accounting”.

“Let’s hope the government publicly releases whatever valuations it has received for public scrutiny,” he said.

Tony Makin, Griffith University professor and former consultant economist with the International Monetary Fund, said: “If it has been revalued based on the market price at the moment, then that may not ­reflect what it is really worth.

“In many cases, assets have been over-inflated in the past six months – we are seeing it with houses and shares – so we are in a bit of a bubble at the moment.”

Mr Dick’s confirmed revaluation was based on market price. During question time on Wednesday, he said the Queensland Investment Corporation sought valuation advice from Bank of America, BIS Oxford Economics and Deloitte, as well as legal firm Allens Linklaters.

Opposition Leader David Crisafulli said: “The trickery with the Queensland Titles Office … is not just dodgy accounting, it’s just plain and simply wrong.”

Mr Dick has defended the valuation, which has helped him improve the state’s debt profile, saying it was approved by the QIC’s independent investment committee and two global accounting firms, PwC and EY.

The registry was moved into the Queensland Debt Retirement Fund earlier this year as a tool to ­improve the growing debt-to-revenue ratio, a key measure for rating agencies.

The ratio will surge to 121.6 per cent by the next election, compared to 70 per cent when the Palaszczuk government delivered its first budget in 2015.

Queensland’s ratio will reach 102 per cent this year, compared with 129.6 per cent in NSW and 162 per cent in Victoria.

Queensland’s independent auditor-general has recommended the government make the Debt Retirement Fund’s statements publicly available to improve transparency, which would require legislative change.

Professor Makin said there was “over-optimism” about the level of Queensland’s debt.

“There is a risk … of a further downgrading of Queensland’s credit rating, which will push up interest rates,” he said.

States with better credit ratings pay less interest on their debt because they are seen as less risky to investors. Queensland lost its AAA credit rating in 2009 as it grappled with growing debt levels and large deficits.

Leading credit ratings agencies Moody’s and S&P Global said the economic recovery was ahead of schedule.