|CPDS Home Contact||Professionalism: Chronological Summary About the 2009-10 Budget|
Email sent 25/5/09
Queensland's 2009-10 Budget Stress: The Tip of an Iceberg?
In a recent article you outlined the emerging public debate about Queensland's budget predicament
I would like to suggest that the difficult budget position is merely a symptom of much deeper problems facing government in this state. In particular:
These points are explored further below.
Good luck in your efforts to further promote public awareness of the strategic issues involved in Queensland's forthcoming state budget.
Details Regarding the Above Dot Points
A: Relationship with the Economic Outlook
Queensland's economic outlook and budget position depends on the world's recovery from the global financial crisis (GFC) - and particularly on the mineral and energy exports expected from future growth in Asia. The federal government is experiencing financial difficulties partly because spending commitments were entered into on the basis of revenues generated during an unsustainable economic boom (see Australia's Future Tax System: The Cost of the Financial Crisis and the Opportunity to Fix Government ). Queensland appears to have yielded to the same temptation (see comments on 2005-06 budget).
Thus serious assessment of the prospects for global recovery and future growth in Asia must be central to any debate about Queensland's budget. Yet this does not seem to be being publicly mentioned by anyone.
The present writer's suspicion is that there may be structural problems in the way of easy recovery (see Are East Asian Economic Models Sustainable?). If so, then creating well-paid jobs and maintaining the levels of public spending to which the community has become accustomed requires more than simply waiting for the pre-GFC economic environment to be restored. Options to create an environment in which business would be more able to take the lead in recovering from recession (and, by doing so, to boost employment and tax revenues) are outlined in A Case for Innovative Economic Leadership
B: Pre-existing Budgetary Concerns
Queensland's budget was apparently already headed for trouble before the GFC made economic growth uncertain. There were grounds for suspecting structural difficulties before these were eased by the post-2000 economic boom (eg see Emerging Financial Problems, 2001), and that these were being papered over by dubious capital accounting practices (eg see 'Underlying Pressures for Increased State Taxation').
C: Mismanaging Infrastructure
Those difficulties have been compounded by mismanaged catch-up infrastructure spending in recent years. The problem seems to be that;
Moreover catch-up infrastructure spending was needed in the first place because of defects in national and state machinery of government (see How Queensland's Infrastructure Management System Deteriorated). For example, infrastructure backlogs emerged in the 1980s and 1990s because: (a) especially since the 1970s, federal-state financial imbalances have seriously reduced the ability of state governments to take real responsibility, or be held democratically accountable, for their functions; and (b) amateurish attempts at administrative 'reform' in the early 1990s further eroded the public sector's ability to produce practical results (see Towards Good Government in Queensland, and Mismanaged Reform). There has, as yet, been no serious attempt to remedy the underlying causes of these problems.
D: Market Failures and GOCs
The price that might be obtained should not be not the only issue in considering selling major government assets.
In an attempt to to improving the efficiency of public sector functions in the early 1990s, the 'reformist' Goss administration corporatised various major functions (ie it created government owned corporations (GOCs) for ports, railways, electricity. water).
This was unwise as politically accountable organisations (which are subject to interest group pressures as well as to customer demands) can never succeed commercially in a competitive environment (eg see The Limited Economic Effect of 'Commercialization', and Government Business Enterprises). The creation of GOCs was a only a temporary way of avoiding the question of whether affected functions suffer real market failures. Where there is no significant market failure, there is no reason for government ownership / operational control. But functions which do suffer major market failures can't satisfactorily be privatised and should be undertaken by non-commercial public sector entities. The problem with privatising functions subject to market failures was illustrated by the case of Dalrymple Bay Coal loader.
In parallel with corporatisation, the Goss administration introduced arrangements to promote efficiency by 'commercializing' the operations of other service providers The practical result was that the structural separation of 'purchasers' (who had the responsibility) and 'providers' (who had the technical skills and coal-face knowledge) was one factor in the fragmentation of responsibilities that left no one in a position to plan infrastructure. The whole exercise arguably reflected a failure to seriously consider the nature of government (see Governing is not Just Running a Large Business).