Queensland budget warning: tighten the purse strings

Queensland state departments have been issued with funding caps ahead of the Crisafulli government’s first budget in June, to avoid risking a first credit rating downgrade in 15 years.

Queensland LNP Treasure David Janetzki speaks in parliament recently. He has launched the crackdown on departmental spending after almost a decade of Labor in power. Picture: NewsWire / John Gass

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Government departments have been issued with funding caps ahead of the Crisafulli government’s first budget in June, after warnings that Queensland needed to cut spending and debt or risk the state’s first credit rating downgrade in 15 years.

Treasurer David Janetzki has launched the crackdown on departmental spending after almost a decade of Labor in power, and multibillion-dollar blowouts in projects and the public service wage bill, ahead of his first budget on June 24.

The heads of the state departments were each sent a letter this week from Under Treasurer Paul Williams warning them to consider scrapping or rewriting their budget submissions while still making sure election promises were delivered and “employment security across the public service” was guaranteed.

Multiple sources have also told The Australian that the departmental heads were separately ­issued specific spending limits with “funding envelopes” and that there was an expectation that while departments and ministers could pitch new policies or programs, they needed to be prepared to find the equivalent in savings.

“If you want to have a new program, you need to make a very compelling case or find savings yourselves,” a source said.

One source said the proposed funding envelope in several ­departments did not cover the current annual operating costs, but while many departments were facing a fiscal squeeze, Queensland Health would be allowed to increase its funding to keep pace with an increasing population.

The cabinet budget review committee is working its way through the budget submissions.

New Queensland Under-Treasurer Paul Williams. Picture: Heritage Bank

In the letter, obtained by The Australian, Mr Williams warns that the mid-year economic update – delivered in January, and which predicted an extra $53bn in operational and capital spending over the next four years – “means there is limited scope for new funding in the 2025-26 budget.”

“Your advice is sought on how your agency could continue to deliver its essential services within an indicative services funding ­envelope across the forward estimates,’’ he wrote.

“For clarity, government election commitments must be delivered and employment security across the public service must be guaranteed. I appreciate this may mean you need to revisit the proposals previously submitted to CBRC.

“Where you identify opportunities to moderate/withdraw or reprioritise from within recurrent expenditure, please ensure these and any associated implications are clearly outlined for CBRC consideration.’’

In February, credit ratings agency S&P revised the state’s outlook from AA+ stable to AA+ negative.

It warned that the LNP government, which was elected last October, had to slash spending or face a credit rating downgrade.

S&P pointed to Mr Janetzki’s mid-year economic update which predicted the extra $53bn in operational and capital spending over the next four years and a corresponding “rapid rise in debt” to pay for new expenditure.

In a statement, Mr Janetzki said the government was still dealing with the fiscal legacy of Labor.

“We inherited a massive mess from Labor but we promised Queenslanders that departments would be properly resourced and the public service could continue to grow, and that is what we will deliver,’’ he said.

“As the Under Treasurer has advised departments, government election commitments must be delivered and employment security across the public service must be guaranteed.”