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Is our state slowly going broke, or are we just heading in that direction?

Opinion

The Auditor-General’s report on Queensland’s finances is sobering reading. We’re not going broke but we are going in the wrong direction, writes Robert MacDonald

Print article

You don’t often think of literature when reading Auditor-General’s reports.

But Ernest Hemingway came to mind when flicking through Queensland Auditor-General Brendan Worrall’s recently released review of Queensland’s finances, which says that for the past four years, the Government has been spending more than it’s been earning.

Here’s an excerpt from Hemingway’s 1926 novel, The Sun Also Rises:

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

Is Queensland gradually going bankrupt? No, but things can’t keep going on the way they’re going.

Here’s what Auditor-General Worrell says:

“Since 2016–17, the Queensland Government’s expenses have increased by $7.3 billion
(11 per cent), while it has only been able to increase total revenue by $4 billion (six per cent).”

And not only has it been spending beyond its means it’s also been borrowing to cover the shortfall and will continue to do so, with debt climbing from around $72 billion last year to more than $90 billion by 2022-23.

Treasurer Jackie Trad says everything’s under control, which of course she would; she’s the Treasurer.

Queensland’s debt-to-revenue ratio, she pointed out in last year’s Budget speech, remains lower than any other major state except New South Wales. And that’s only because NSW sold some assets – something Queensland would never do.

And the 2019-20 Budget does forecast that revenue will be higher than expenses over the next four years. But then, so did the 2016-17 Budget.

For now, Trad has the Auditor-General onside.

“The Queensland Government’s borrowings will increase but are currently sustainable,” he says. The key word there is “currently”.

Looking ahead, The Auditor-General says this:

“Unless the Queensland Government can increase its revenue or constrain the recent growth in its expenses, it risks not being able to meet the costs of its activities from the revenue it earns going forward.”

That might not be bankruptcy – gradual or sudden – but, in the deadpan language of auditors, it sounds like a pretty serious note of caution.

An eternal problem for state governments is finding new sources of revenue. There are only so many things they can tax – payrolls, land, cars, property, mining and gambling are the main ones, all of them pretty well-touched-up by now.

And so, for now,  Trad and her Treasury team are concentrating on expenses – not by actually cutting anything, but by “prioritising” government activity.

Specifically, it has set up a Service Priority Review Office, to “drive the realisation of reprioritisation targets, by conducting reviews of Queensland public sector agencies and programs.”

Whatever that means exactly, the Government says it has found savings of $715 million in 2019-20 alone by:

All of which sounds like the sort of good budget management practices you’d hope would have already been in place, rather than any serious reassessment of the worth or otherwise of existing government programs.

And don’t worry about the debt says Trad. The Government has set up a $5 billion Queensland Future Fund – $3 billion of it taken from the surplus of the State’s defined benefit fund – which will be used to pay down state debt. The Government has also previously found debt-relief funds by changing the way it covers its long service leave liabilities

It makes sense to put idle money to work, as long as the public servants can keep taking their long service and be paid their pensions – and the Government assures us that’s the case.

But you do get the impression of a team of Treasury bean counters tapping every hollow log they can find.

Trad is delivering her next Budget on 28 April, six weeks earlier than normal, presumably to give the Government more time to spread the good times around before the next state election on October 31.

Pre-poll election budgets are never about slashing and burning or tightening belts. They’re about winning votes.

But this one also has to be about convincing business, investors and the credit rating agencies, that the Palaszczuk Government has a credible plan for steering us back in the right direction.

And it’s got to be more than words or more clever shuffling around of money.

To quote Hemingway once more:

“Never confuse movement with action.”

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