Queensland public transport fare cut ‘not anti-inflationary’

Queensland Treasurer Cameron Dick claims the plan to slash public transport fares to a flat 50c fee would beat back inflation but economists warn any reduction would be superficial.

Queensland Treasurer Cameron Dick. Picture: Liam Kidston

Queensland Treasurer Cameron Dick claims the state government’s plan to slash public transport fares to a flat 50c fee across the state would beat back inflation but economists say any reduction would be superficial.

The $150m trial to subsidise public transport fees for six months, announced two weeks before the state budget, is part of the government’s cost-of-living spending spree ahead of the October state election.

Mr Dick said the plan would put “downward pressure on inflation”, by mechanically driving down the consumer price index.

“One of the basket of goods and services that are needed as part of the determination of the consumer price index is the cost of public transport,” Mr Dick said.

University of Queensland economics professor Lionel Page questioned whether the six-month trial would have a long-term impact on inflation.

“The transport costs are part of the (consumer price index) … so the index recording of the cost of (transport) would be decreasing mechanically because of the lowered cost,” Professor Page explained. “But if people use their money (that they have saved on transport) to spend on other things, then the price of other goods may increase.

“A huge slash of transport costs will mechanically start showing a decrease in inflation in the consumer price index, which reflects a decrease in the cost of living for Queenslanders.

“But the concept of economies is that when people have more money, they will do something with the money. So now if I don’t pay to take the train, and I go to work, and everybody’s doing the same, then the demand to work increases in the short term, and it can push the price up.”

University of Queensland’s head of economics, Daniel Zizzo, said cutting public transport costs would not have a significant impact on bringing down sticky inflation. “Considering public transport is not used as much as it could be in Queensland, I don’t think there will be much of a meaningful impact on inflation,” he said.

“It is an interesting policy and it will provide some very interesting insights for governments across the country on what bringing down the cost of public transport to virtually zero could look like.

“But there is the question of if you had $150m or thereabouts to invest in the initiative to public transport, is this the best way of possibly deploying the money?”

The slashed public transport fees come weeks after the government announced a $1000 power bill rebate, which some economists have warned could add to inflationary pressures.

The Queensland government has abandoned its forecast surpluses for the next two years in favour of cost-of-living handouts ahead of the election.

Updated figures released by Mr Dick reveal the June 11 budget will wipe a projected $122m surplus in 2024-25 and replace it with a $3bn deficit. In 2025-26, the $91m surplus forecast in December will be reversed with a deficit of “less than $1bn”.