[Status of this Modified Submission]

This is a modified version of the working draft of a submission to the EDC, which had previously been presented on this web-site as an [intended] submission.

Because of the author's prior experience over several decades of suppression of ideas [1,2,3] by Queensland's often-outdated-and-authoritarian political establishment, it was decided that a formal submission to the EDC would only be made if the Committee was prepared to approve its public release.

Author's background: includes study of leading-edge economic strategy issues on behalf of the Coordinator General's and Premier's Departments during the 1980s.

In particular this included: (a) authorship of the first report suggesting how to achieve economic diversification in directions later endorsed as under the 'Smart State' strategy (Towards a Strategy for Technological Development in Queensland, unpublished, Premier's Department, 1983); (b) participation as the Coordinator General's representative in the 1985 Task Force on Employment; and (c) an unresolved dispute with the Premier's Department following a 1992 abuse of natural justice involving  its refusal to allow merit to be considered in relation to making a senior economic policy R&D appointment (a role apparently similar to that which the author had played for a decade).

Each of the above involved options that would have speeded progress in economic development that were suppressed because they were not at the time politically / bureaucratically understood (ie respectively: (a) market, not public service, support for innovators; (b) development of the economy rather than government support for individual large investors; and (c) a theoretically and practically important breakthrough in viewing economic development as a process of systemic learning). Also each option would have boosted the economic welfare of the Queensland community, but reduced the ability of state politicians to dispense patronage.

The final episode was suggested in the public administration literature (McDermott P., `Tenure of Senior Queensland Public Servants', Australian Journal of Public Administration, March 1993) to have eroded the tradition of Public Service professionalism (an outcome that appears to have had bipartisan political support)..

The author was advised that the EDC would decide on August 5 2009 whether or not it was willing to permit a submission to be published.

Accordingly, the author asked the EDC on 5 August whether it was willing to accept a version of the 'intended' (and by-then-already-published) submission - "with slight editorial changes such as removing references to 'intended' and 'draft' submission, and the section on the Status of the intended submission".

In response the author was advised that, though approval for publication of the submission on this website could not be approved prior to its submission to the committee, it was likely that publication would be approved, providing its contents matched the version that existed on 5 August (without the items nominated as being deleted). Accordingly a formal submission was forwarded on 7 August which was similar to the draft of 5 August (less the elements nominated for deletion, and also including a number of typographic / grammatical changes and other elements that were clearly identified).

On August 10 the author was advised that the submission forwarded on 7 August would be forwarded to the Committee, and that submissions would normally be approved for publication after receipt and examination by the Committee.

When advice was received that the formal submission has been approved for publication, it was intended to add the formal submission to this web-site.

On 3/9/09 it was advised that the formal submission had been published had been published on the EDC web-site, so the formal submission was added to this web-site.

Ongoing editorial changes are being made to this present document that will not appear in the formal submission to the EDC]

Economic Policy Principles for Queensland - email sent 12/1/15

Gene Tunny,
Queensland Economy Watch

Re: Good set of policy principles (mostly) from new Queensland think tank AiP, Queensland Economy Watch, 6/1/15

Thanks for drawing my attention to the high level economic policy options for Queensland’s forthcoming election that have been developed by the new Australian Institute for Progress (AIP). It certainly seems that economic issues will be a major focus of the coming state election (eg see Wardill S., ‘Economy is key to election for both Labor and LDP’, Sunday Mail¸11/1/15). It is thus great to see a body such as the AIP developing proposals for economic policy directions.

The following is an attempt to: (a) reinforce the point you made about one obvious deficiency in the AIP’s proposals; and (b) suggest aspects that would need to be considered in giving effect to the AIP’s list of other broad policy objectives (a list that is reproduced at the end of this email).

Your article generally endorsed the AIP’s suggested policy agenda – though you objected to its item 7 on the grounds that government should not ‘pick winners’ (eg mining, agriculture, tourism) but rather should let market forces do so while government simply: (a) reduces the regulatory burden on all industries; and (b) only intervenes where there are clear market failures. In support of your contention it is noted also that:

• The market liberalization emphasis that was adopted in the 1980s and 1990s as the basis for strengthening Australia’s economy (ie tariff reduction, financial deregulation and microeconomic reform) seemed to emerge from OECD conclusions (in about 1970) about the effect of government efforts to strengthen economic performance in Europe in the 1960s. Governments had tried to help in the face of de-industrialization as previously important manufacturing functions shifted to low-wage economies (especially those in East Asia). It was apparently concluded that government attempts to ‘help’ had proved counter-productive (ie had slowed, rather than speeded the development of new / higher productivity economic functions);
• Reasons why direct intervention by democratic governments is likely to inhibit (rather than strengthen) the emergence of economic functions that can enhance economic growth and high-wage job creation are suggested in Economic solutions are beyond politics (1995). The latter drew attention to: (a) the consequences of interest group pressure; and (b) the need for leading edge commercial knowledge that is unlikely to be widely available (and thus politically accessible);
• Some recent comments which parallel your contentions are in Develop a Productive Economy - But Don't Pick Winners (2014). This included: (a) suggestions that ‘picking infrastructure winners’ through a central planning process can be just as counter-productive as ‘picking industry winners’ (eg because it may not result in selection of projects that truly match regional needs); and (b) reference to broader option to improve Australia’s economic performance (in Turning Australia Around). The latter, in turn, included reference to non-conventional apolitical methods to develop stronger competitive advantages that should work in a democratic environment.. These and related issues were also addressed in 'Australia's Competitiveness': Some Suggestions (2013),Spilling the Beans on Government ‘Assistance’ (2014) and Creating an Environment for Innovation-led Economic Growth Requires Business (Not Government) Leadership (2014);
• ‘Picking winners’ in terms of economic functions (eg support services to desired major economic functions) is just as damaging as ‘picking industry sector winners’ that the AIP advocated. The provision of direct government ‘assistance’ to individual firms who are doing whatever is currently politically favoured is the opposite of developing the ability of the market economy to provide the necessary support to ‘winners’ that the market endorses (and is a significant obstacle to economic progress) – see Problems with Direct Government 'Assistance' (2002). The provision of direct government ‘assistance’ has long been favoured in Queensland as an alternative to development of the state’s real economy.

There is (I submit) also a need for deeper consideration of several of the other broad / overly-simplified aims that comprise the AIP’s suggested policy agenda. For example:

• Budget repair is highly desirable, but very complex, because (for example) Queensland’s budgetary problems: (a) started much earlier than has been generally recognised (ie in the 1990s); (b) were significantly driven by unsustainable levels of capital spending and by wastage due to dysfunctional government machinery that resulted from amateurish earlier efforts to increase its effectiveness; and (c) did not seem to be adequately exposed by the Commission of Audit (eg see Recovering from Queensland's Debt Binge, 2012 and Auditing the Commission, 2012). The latter drew attention to: (a) what had been learned as a result of the work of the Queensland’s Commission of Audit; (b) the fact that problems had started much earlier than was being presumed; (c) the apparent need dig deeper to fully expose Queensland real financial challenges; (d) the lack of transparency about government financial operations; and (e) the inadequacy of the Commission’s goals / methods. For example, inadequate attention seemed to be being given to: (a) the option to improve the budget outcome through strengthening the tax base through a more serious approach to economic development; (b) the fiscal benefits of reforming Australia’s federal system; and (c) the benefits of building more effective government functions and the potential risks associated with asset sales merely to reduce overall debt levels;
• The criteria for whether government should own assets or provide goods and services need to be clearly defined. Those criteria would presumably involve the existence of a legitimate public interest and / or real market failures. The private ownership of functions that involve such significant market failures that strict regulation is needed can be economically disruptive (eg consider Privatisation of Monopolies Leading to Regulatory Failure). Likewise the private ownership and control of functions that have significant public policy implications can: (a) erode governments’ ability to undertake its responsibilities competently; and (b) potentially result in corruption and outcomes that are not in the public interest. In Queensland in recent years there seem to have been apparent grounds for concern about the effect of conflicts of interest in relation to: (a) financial dealings by QIC and other Treasury-linked entities; and (b) past privatisation proposals;
• Improving the efficiency of government services (eg in health, education, families and housing) is a noble aspiration. This has been the consistent focus of Australia’s governments for three decades. However methods that have been used have not been based on realism concerning: (a) governments’ core role – ie governing; and (b) how government can be most effective (eg see Decay of Australian Public Administration, 2002). ‘Reform’ was based on advice from inexperienced political advisers, academics (who knew the theory but also lacked experience) and business (who wanted to make governments more business-like in undertaking their primarily non-business-like functions). Large numbers of dysfunctions and crises resulted (eg see Evidence of Dysfunctions, 2001; Defects in Infrastructure Planning and Delivery in Queensland , 2002; Intended Submission to Health System Royal Commission (2005); Structural Incompetence and SE Queensland's Water Crisis, 2007). Undoubtedly the efficiency of government service delivery can be improved, but doing so mainly requires understanding why efforts to achieve this over the past three decades have been ineffectual;
• Investment in infrastructure is important but is unlikely to be effective and efficient without substantial reform of the machinery for planning, developing and financing infrastructure (for reasons suggested in Defects in Infrastructure Planning and Delivery in Queensland, 2002; Infrastructure Constraints on Australia's Economy, 2005; Infrastructure Obstacles and Opportunities: Submission to Productivity Commission , 2014);
• The problem of housing affordability is important. Some speculations about the issues involved are in Some Thoughts on Housing Affordability (2007). However the problem seems to now particularly be a by-product of the use of easy money policies as the main method for macroeconomic management (as ultra-cheap credit encourages speculative investment in the hope of effortless profits) – and the monetary policy issue is very complex in itself (eg as suggested in Reducing the Risk of Financial / Economic / Political Crises, 2014 and This Could be the Year We Acknowledge the ‘Weaponisation of Finance’, 2015);
• Re-negotiating the federal compact is highly desirable. Some speculations about what this might require are in Fixing Australia’s Federation (2010+).

Queensland’s experiences in the 1970s show how it would be possible to use a broad economic policy agenda such as the AIP suggested (with appropriate adjustments) as the focus for substantial and effective enhancement of Queensland’s government and economy by stimulating mutually-reinforcing initiatives that build on existing internal and external capabilities.

By way of background I note that I had to opportunity some time ago while working for Queensland Coordinator Generals to:

• study machinery of government issues (in the 1970s), while also observing / involved in efforts to enhance Queensland’s machinery including the means used for planning and development of infrastructure;
• study international debates about economic strategy (in the 1980s), and author one of the first proposals for diversification of Australia’s resource-dependent economy into knowledge intensive functions (see Smart State: Some Informal History, 2012).

My ongoing interest in these areas is reflected in numerous documents on my web-site.

I would be interested in your response to my speculations

John Craig

Key Policies for the 2015 Queensland Election (Australian Institute for Progress)

1. “Budget repair, ensuring that operating income is greater than operating expenses and that debt is paid back from cashflow and sensible asset redeployment, including sales/leases of mature assets and those that can be better run by the non-government sector.
2. Privatisation of the energy sector so that consumers enjoy lower prices and better services.
3. Providing a better service by government for the same or less expenditure, particularly in areas like health, education, families and housing
4. Concrete plans to increase numeracy and literacy rates, provide children with the content and research and analysis skills to adapt to any future cultural or employment environment, and an awareness and appreciation by children of their own culture. The most important welfare measure is a good education.
5. Investment in infrastructure that will improve the quality of life for Queenslanders and increase efficiencies leading to greater productivity and state wealth.
6. Solving the housing affordability problem.
7. Enabling and promoting the industries where Queensland has a competitive advantage, specifically mining, agriculture and tourism.
8. Renegotiating the federal compact so the state has access to adequate revenue to meet its commitments.”

Queensland Economic Policy Issues - email sent 18/1/15

Gene Tunny
Queensland Economy Watch 

Re: Economic Policy Issues in the 2015 Qld Election – Griffith-ESA Qld event on 28 January, Queensland Economy Watch, 28/1/15

Thanks’ for your advice about this forthcoming economic policy panel discussion. This will undoubtedly complement the economic policy options for Queensland’s forthcoming election that have been developed by the new Australian Institute for Progress (AIP) to which you previously drew attention (and on which I had previously offered comments in Economic Policy Principles for Queensland).

I should like to suggest some reasons that such efforts are important.

The most obvious justification for independent economic policy analysis and debate is that there are serious deficiencies in the ‘economic’ policy options that the major political parties have advanced in the context of the forthcoming state election. Their emphasis has been on state fiscal issues (ie revenue, spending and state debt). And, while state fiscal issues are important:

• the public sector is only (about) 30% of the economy, and the state sector is only part of the public sector (as the latter also includes federal and local governments);
• there is some doubt about the adequacy of even the fiscal agendas that the major parties are advancing (as you suggested in Neither party gets a high distinction in fiscal policy, 17/1/15);
• there are ‘strategic’ developments which would need to be part of any serious economic policy that don’t seem to be being considered.

The ‘strategic’ developments that appear to me to be need to be taken into account in any serious economic policy agenda include:

• the exposed and unstable state of the global economy (eg as suggested in An Approaching Crisis?). The G20, which met in Brisbane in late 2014, did not seem to really get to grips with the challenges that exist (eg see Reducing the Risk of Financial / Economic / Political Crises, 2014). While Queensland can’t solve the world’s problems, it needs to take them into account in planning its future;
• the growing problem of social inequality in developed economies. This has the potential to generate social and political instability – and has been seen as a challenge to the viability of democratic capitalist systems of political economy (see Who Is Failing the Lower and Middle Classes? 2014). Though Australia’s position has been relatively good to date (because of a China-driven resources boom) the problem exists here also and is getting worse (see Restoring the Viability of Democratic Capitalism, 2014). The easy money policies that have been needed to maintain growth in the face of structural international financial imbalances seem to be a significant factor in increasing inequality (because ultra-cheap credit boosts the wealth of those with existing wealth), but the existence of increasingly competent competition from low wage economies whose communities also have lower expectations in relation to public services and income transfers is arguably also significant. There is a need for any Queensland ‘economic policy’ to take these aspects into account (eg because of what the latter implies in terms of the need to emphasise the development of international competitive advantages), though the challenge arguably is not simply economic (see The Challenge and Potential Cost of Inequality and Insufficient Income, 2014);
• the emergence of East Asia as a major source of economic opportunity and competition through the use of ‘bureaucratic non-capitalist’ methods that are quite different to those of Western societies and are neither widely understood nor easy to understand (see Babes in the Asian Woods);
• the new attempt which seems to be being made to create an ‘Asian Sphere’ (perhaps including Australia) in which the authoritarian methods which have been the basis of the region’s economic ‘miracles’ might be freed from the constraints imposed by the ‘liberal’ (ie democratic capitalist) post-WWII international economic order that the US has championed (see Creating a New International 'Confucian' Financial and Political Order);
• the increasing geo-political significance of financial and economic considerations (see This Could Be the Year We Acknowledge the 'Weaponization of Finance', 2015); and
• the inability of democratic governments to take sole / primary responsibility for the implementation of some useful economic policy options (eg see Innovation-led Growth Requires Business (Not Government) Leadership).

It will be interesting to see how the Australian Institute for Progress and the forthcoming Griffith / AES panel discussion deal with such issues.

John Craig

The Black Holes in LNP and Labor Economic Agendas - email sent 23/1/15

Mark McGovern
QUT

Re: The black holes in LNP and Labor plans to fix Queensland’s debt, The Conversation, 23/1/15

Your article pointed to weaknesses in current LNP / Labor proposals related to Queensland’s public debt problems. However in that area Queensland’s political system has at least recognized that there is a problem.

An arguably bigger challenge involves strengthening Queensland’s economy, and this does not even seem to have been acknowledged much less addressed. Some suggestions about the need to consider more than Queensland’s debt problems were outlined in Queensland Economic Policy Issues (2015). The world economy is apparently sinking into a debt / deflationary trap because easy money policies have been used to sustain growth – but have now reached a point where they can no longer be effective (eg see also Evans-Prichard A., ‘Larry Summers warns of epochal deflationary crisis if Fed tightens too soon, The Telegraph, 22/1/15). There are geopolitical complexities in attempts to find a path to sustainable global growth because of structural incompatibilities between Western and East Asian financial / economic systems. There are social policy issues that inter-twine with economic issues. The so-called resources’ super-cycle (driven largely by a massive credit boom in China) has come to an end – and thus will put recently-rapidly-growing industries under pressure while requiring Australia / Queensland to look elsewhere for sources of growth. There are significant technological shifts on the horizon that will not only create opportunities for those positioned to exploit them, but disrupt various existing economic functions. Australia’s / Queensland’s economies’ ability to find and exploit new opportunities is anything but well developed (see How durable is Australia’s strong economic performance (Luck?)). Past efforts to strengthen Queensland’s public sector and develop its economy were frustrated by public service politicization. Government effectiveness is also constrained by perceptions (or the reality) of abuses of power (eg see Queensland’s Next Unsuccessful Premier, 2012)

Queensland debt problems need to be dealt with, but they have to be managed as only one element in a much broader agenda – as suggested in Curing Queensland’s Myopia (2011).

I would be interested in your response to my speculations

John Craig

Growth is a Constructive Goal - But is Not Guaranteed - email sent 19/2/15

Professor Fabrizio Carmignani,
Griffith University

RE: ‘Queensland’s biggest economic challenge isn’t debt – it’s growth’, The Conversation, 17/2/15)

I should like to provide some feedback in relation to your worthy effort to make positive suggestions about the new Queensland Government’s approach to the economy. My comments relate to: (a) uncertainties about growth prospects and about government’s ability to counter-balance the business cycle; (b) the importance of boosting Queenslanders’ ability to turn good ideas into new and better enterprises; (c) defects in government machinery that make it very hard for governments to spend efficiently; and (d) uncertainties about the reliability of Queensland’s official budgetary data.

My Interpretation of your article: New ALP government’s pre-election policies were modest. The economy was the main election issue. The economy is ultimately about people. Inclusive growth / welfare is important. Budgets, taxes, debt, spending are only tools. Recent governments have mistaken tools for objectives – and thus seek to minimize debt / deficit / spending. Shrinking government should not be the goal. Good fiscal policy should involve: (a) synchronization with business cycle; and (b) ensuring spending is on quality projects / programs. There is a need for perspective on Queensland’s debt. It has grown substantially since 2006-07 – and the debt / GDP ratio is now higher than elsewhere in Australia. Debt is not a problem if the economy grows rapidly. Thus emphasis should be given to growth rather than to debt repayment. There is no evidence to suggest that the private sector always does better. A final suggestion involves looking at economic data to ensure that fiscal policy is synchronized with business cycle. Thus government needs to identify / predict phases in that cycle. The data currently suggest that economy is not strong – GDP / capita is falling; only part-time jobs are being created; and unemployment is higher than three years ago.

There is no doubt, as you suggested, that fiscal considerations are only part of the economic question – and that, if the economy grows very rapidly, then any current debt levels will eventually be seen to be modest. There is also no doubt that: (a) the benefits to people (inclusive of all people) are what is important; (b) the private sector does not do everything best; and (c) Queensland’s economic position is currently challenging.

However there are considerations that complicate your suggestions.

First, it is difficult for government to make the reliable predictions about the business cycle that you advocate. The global economy is increasingly unstable – as noted in Ending Australia's Political Paralysis?. In fact, while rapid economic growth might solve Queensland’s debt challenges, there is no certainty that the international economic environment (which is plagued by the demand deficiencies and overcapacity associated with high debt levels) will allow this to be achieved.

Also, it is anything but trivial for governments to synchronize spending with the business cycle as your article suggested. As I understand it, Keynesian notions of counter-cyclical government spending lost credibility in the 1970s primarily because it was so hard to get the timing right. It usually took a long time to launch government spending programs. Thus such efforts often turned out to be pro-cyclical (ie to accentuate booms and busts) rather than being counter-cyclical.

Second, it is worth noting that while what governments do in terms of taxes, spending and regulation is important, it is not the only thing that matters. For example, while there are many theories of economic growth, it has long been recognized that knowledge / information / technology is a key factor in boosting productivity and growth. Thus to maximize Queensland’s economic growth (and to render debt levels easier to handle in the longer term) attention needs to be given (amongst other things) to the processes whereby Queensland citizens and enterprises access strategic market and technological intelligence and translate this into new and stronger economic activities. Merely acquiring potentially-economically-relevant knowledge (eg by education, research, invention, study of other’s best practices etc) is not sufficient. It was recently noted that many technologically-advanced Australians have moved to Silicon Valley because it has an environment favouring entrepreneurship (Bingemann M., ‘Brain drain worsens as 20,000 Australians work in US tech hubs’, The Australian, 17/2/15). Past efforts to develop Queensland’s economy have done too little to boost market-oriented / sustainable support for turning its citizens’ and enterprises’ good ideas into new and better economic activities (see Dumb Ways of Being 'Smart' in Queensland's History, 2015). Some suggestions about how that obstacle might be reduced are in A Case for Innovative Economic Leadership (2009).

Third, your article highlighted the importance of ‘quality’ spending by government (rather than just ‘any’ spending). However damage that has been done to Queensland’s machinery of government over the past couple of decades makes it almost impossible at present to ensure ‘quality’ spending (eg consider Towards Good Government in Queensland, 1995; Decay of Australian Public Administration, 2002; and Defects in Infrastructure Planning and Delivery in Queensland, 2002). The first of those documents emphasized the adverse effects of politicization and deskilling of the public service. The second also noted the effects of trying to be ‘business-like’ about governments’ primarily-non-business-like functions. The third referred, for example, to:

•  the adverse effects of politicization of public services on government competencies;
•  the adverse effects of fragmentation of responsibility that resulted from commercialization and competitive service delivery in infrastructure delivery. The latter created difficulties. Infrastructure tends to: (a) be the capital component (eg roads) of functions (eg transportation) whose other aspects governments are simultaneously dealing with; and (b) involve functions that need to be dealt with as a whole system (rather than as separate projects / enterprises). Fragmentation of responsibility tends to impede coordination with : (a) the non-capital aspects of associated government functions (eg transportation policy generally); (b) other types of infrastructure; and (c) regional development generally;
•  the chronic difficulties that states have in performing their constitutional functions in the face of Australia’s extreme federal financial imbalances. As tariff protection did to Australia’s manufacturers, federal financial imbalances tend to force control into the hands of central groups concerned with lobbying for financial assistance - rather than empowering those with relevant experience and technical knowledge about the job in hand;
•  failed attempts to use centralized ‘strategic planning’ methods – which suffer the same obstacles as centralized economic planning (eg an inability to access all of the information needed to make good decisions);
•  the intrinsic complexities of using public-private partnerships for functions subject to significant market failures.

Queensland’s Goss and Borbidge governments were characterized by limited achievements because of the damage that the former had done to the state’s machinery of government. The Beattie Government then apparently attempted to ‘just get on with it’ and then experienced many crises / apologies / costly bailouts because Queensland’s machinery of government was just not up to the job. For example, a commitment was made to a new dam for SE Queensland on the basis of a six week desktop study – rather than the 6 years of feasibility studies that had been done for Wivenhoe Dam. The result was not a sparking success (see Structural Incompetence and SE Queensland's Water Crisis, 2007). An apparent emphasis on finding private funding options for dealing with Brisbane’s transport problems seemed to result in developments that arguably do not adequately accord with regional needs (see Brisbane’s Transportation Monster, 2008). Similar distortions seem to have affected federal infrastructure priorities (see Infrastructure Magic?, 2008 and A Pink Batts’ Award for Public Goods and Services’, 2014).

The Bligh and Newman Governments were characterized by increasing concerns about Queensland’s now-obvious problems (ie rapidly escalating debts and the need to prevent ineffective government machinery from simply leading to ongoing crices and rising costs). Though the situation improved, they did not seem to look deeply at the causes of those problems (eg there remained no career protection for public servants whose willingness to point out defects in politically favoured policies was desperately needed; the problems associated with attempts to use business-like methods to deal with governments’ primarily non-business-like functions remained; conflicts of interest and distorted decisions still arose from private ownership and control of some infrastructure that was subjected to serious market failures; the apparent inadequacy of revenues available to states in meeting their recurrent and capital spending expectations; and the distortions and complexities associated with federal fiscal imbalances continued). The Newman Government arguably believed that structural weaknesses in Queensland’s machinery of government that had arisen from ’gung-ho’ political approaches in the past could be resolved by more ‘gung-ho’ political tactics (eg see Reversing Queensland's Institutional Decay, 2013).

Queensland business now reportedly believes that it is importance to ‘kick-start’ infrastructure development to prevent significant reversals by Queensland’s economy (Moore T., Queensland business calls on Labor to kickstart infrastructure pipeline, Brisbane Times, 18/2/15). However until serious efforts are made to create machinery that is able to identify and implement infrastructure that meets Queensland’s real needs, there is a real risk that a ‘gung-ho’ approach to making something / anything happen will continue to impede the achievement of your suggested goal of ‘quality’ government spending (see also Sorting Out Australia's Infrastructure Mess Needs 'Government' not Micro-management, 2014). And without ‘quality’ spending Queensland’s ability to service its public debts will decline – especially as the ultra-low interest rates associated with the era of quantitative easing comes to an end.

Finally Queensland’s fiscal challenges may be more complex than is generally recognized. As early as 2001, it appeared to the present writer that dubious practices in the late 1990s indicated that Queensland was on a path that would lead to financial problems (see About Queensland Budgets, 2001+). And those expectations proved realistic (see Queensland's Debt Binge, 2012). For example:

•  in 2001 it was apparent that: (a) government spending had grown much faster than state’s economy for years; (b) the tax base was weak and Queensland’s share of federal funds was likely to decline; (c) ‘revenue’ was being generated by raiding the balance sheets of government-owned corporations (GOCs); (d) there was a lack of transparency about the budget; (e) some capital transactions had been removed from budget; and (f) fiddles were possible in valuing state assets;
•  in 2012 it was noted that: (a) state expenditure had grown faster than the economy during the 1990s, and capital spending had risen to 1/3 of the all-states’ total; (b) stripping the assets of GOCs to support state budget had started in the 1990s; (c) there were other indications of ‘creative’ accounting; (d) government itself had suggested in 2002 that its $5bn pa budget for capital spending was unsustainable, but the state’s annual capital budget then grew to $18bn in 2009-10; (e) there was a lack of transparency about the state’s financial position; (f) Auditor Generals had expressed concerns; and (g) the privatization of assets that was set in train in 2009 seemed to be affected by problems (eg conflicts of interest).

My suspicion is that official data concerning Queensland’s financial position should not be uncritically accepted to be reliable (see A Forensic Audit is Needed, 2012).

I would be interested in your response to my speculations

John Craig

Governments would be Stupid to Themselves Try to 'Fund Future Growth' - email sent 15/5/16

Darryl Passmore
Courier Mail

Re: Majority of Queensland want Government to spell out a plan for future growth, Courier Mail, 13/5/16

Your article suggested that:

“QUEENSLANDERS have sent an overwhelming ‘show us the money’’ challenge to the State Government on how it intends to fund future growth. An exclusive Galaxy Poll for The Courier-Mail found eight in 10 people want the Palaszczuk Government to spell out a comprehensive plan for funding the development needed to boost the economy having ruled out asset sales. Only 12 per cent said it was not necessary. The result comes as we publish the final action plan, prioritised by readers, showcasing the best ideas generated by our extensive #goqld campaign to fire up the economy as it transitions from an unprecedented mining boom. A major theme to emerge from the campaign was the need for increased infrastructure construction to counter the dive in resources-related building.”

You also recorded the various comments on this issue by: (a) Queensland Chamber of Commerce and Industry (Nick Behrens) who implied that asset recycling (which the government has ruled out) is the only answer – as reducing services or raising taxes would be unacceptable; (b) Infrastructure Partnerships Australia (Brendan Lyon) who argue that there is a need for better leadership; (c) Master Builders Association who point to declining confidence in Queensland; (d) David Chalke (a social analyst) who advocates following the #goqld action plan; (e) Queensland’s Premier Annastacia Palaszczuk who is committed to restoring hope; and (f) Queensland’s Opposition Leader, Tim Nicholls, who supports infrastructure spending.

This all demonstrates the need for vastly better understanding of Queensland’s economic environment, challenges and opportunities – and for more serious leadership especially by Queensland business. My reasons for suggesting this are outlined in Infrastructure Spending Is NOT an Answer in Itself. The economic and financial environment is arguably much more complex than Queensland’s ‘leaders’ and general community seem to be aware of (eg see Interest Rates and The Challenge of Stimulating a Deflationary Economy). The dependence that Queensland business has had on lobbying governments to ‘do something’ (rather than itself providing the 'real economy' leadership that is impossible for democratic institutions) is a key part of Queensland’s current problem.

John Craig

Boosting Growth Without Just Increasing Debts or Drawing Down Capital Reserves - email sent 16/6/16

Paul Laxon,
Ernst and Young

Re: Elks S., Queensland Labor blasted over super raids at its own fundraiser, The Australian, 16/6/16

While this article arguably over-emphasised your concerns about the Queensland Government’s proposal to use some surplus superannuation funds to pay down Queensland’s debt, there is a significant problem because spending (rather than increasing earnings by boosting productivity) is still being relied upon to overcome Queensland’s current economic difficulties.

Queensland’s government faces financial challenges because of unrestrained and sometimes wasteful infrastructure spending in the past and recent significant falls in revenues due to changes in international commodity markets. However more generally, Australia as a whole faces financial challenges because growth since the GFC has come to rely on increasing debt (see The Risk from Rapidly Increasing Debt to Sustain Growth). Australia’s national economic dependence on escalating debt is roughly equivalent to that in China – where it is seen as the likely cause of a financial and economic crisis (see Importing Risks from China).

Thus it is highly desirable to fully explore methods for boosting economic growth that do not simply rely on increasing debts (to which running down superannuation capital reserves to fund public spending is equivalent). A suggestion on how growth might be boosted with little reliance on debt-based spending (ie by non-political stimulation of the emergence of a supportive business environment for knowledge-driven growth) is in Another Approach to 'My Big Idea'.

I would be interested in your response to my speculations

John Craig