Budget numbers show why Anna Bligh must go through with asset sales

THERE is no way back for Anna Bligh now: her government's fortunes and those of the state are tied inextricably to an assets sales program that is despised by the electorate and organised labour, yet central to Queensland's economic recovery.

If there is one loud and clear message out of the 2010-11 state budget handed down today it is that the Premier and her Treasurer, Andrew Fraser, must stay the course.

Paring back the state debt that will burn through $1.2 billion in interest payments next financial year is dependent on the privatisation program that has destroyed the standing of the Labor government with voters.

Bligh must stare down the unions and sections of her own party and crash through on the asset disposals, including Queensland Rail's lucrative freight and coal haulage business.

As the budget papers show, Queensland's economy is emerging from the hole it fell into two years ago. Yet the recovery is patchy, and Bligh knows it will collapse unless the government gets its own house in order.

The state was hit by the perfect storm when the global financial crisis erupted two years ago. At a time when the Queensland government was ramping up borrowings to finance the mother of all infrastructure programs to catch up, belatedly, with population growth, the bottom fell out of its budget.

While revenues are trending up on the back of booming coal exports to China and a tentative recovery in the housing market, Bligh is still short $7.6 billion on the forward estimates in the pre-GFC budget of 2008-09.

The situation would have been even more parlous had the commonwealth not brought forward about $900 million worth of grants due for payment in 2010-11 to the current financial year, to fund infrastructure such as the Ipswich Motorway upgrade.

Bligh is banking that the growth engine in China will continue to whirr, and that Kevin Rudd's resource super-profits tax won't get in the way.

She is also counting on being able to bank the proceeds of the assets sales to cut state debt, and to transfer to the private sector the $10 billion in capital investment QR and the other targeted government businesses will require over the next five years.

The economics of this make eminent sense, but the politics are another matter.

A Galaxy poll at the weekend showed that the state ALP's primary vote was down to 32 per cent, while Bligh continues to trail the LNP's man, John-Paul Langbroek, as preferred premier. Public opposition to the assets sales, born initially of anger that Bligh failed to mention them before last year's state election, is running at 85 per cent.

The temptation for Bligh must be to take a leaf out of her predecessor's playbook and perform a Beattie-flip with double pike. This budget shows why that option won't fly.

Queensland is stuck with these sales, and Bligh is stuck with them, too. That's the bottom line of the budget.

Jamie Walker is The Australian's Queensland bureau chief