For those Cats who are not residents of Queensland, yesterday’s Queensland budget should worry you and worry you a great deal.
Based on Gross State Product, Queensland is Australia’s 3rd largest state accounting for about 18.2% of the Australian economy in FY17 (between VIC at 23.6% and WA at 13.8%). So let’s just say that Queensland is systemically important to Australia.
If it is generally agreed that the debts of Australian banks have an implied guarantee from the Commonwealth Government, then it is not much of a stretch to say the same implies to the debts of the states.
So in its budget presentation yesterday, the Queensland Government announced a major spending and debt splurge. According to Cat Judith Sloan in the Australian:
the Debt Action Plan is going so well that public-sector debt will soar by $13 billion, or nearly 20 per cent, over the next four years.
A 20% debt surge over 4 years! Is the Queensland government being advised by Wayne Swan and Ken Henry?
And this is underwritten by surging commodity export volumes and prices – you know those evil carbon based energy sources of coal and LNG. But what happens if there is a shock to commodity prices and or volumes? Well consider what happened in 2010.
Back in the good old days, with Julia Gillard running the show in Canberra and Anna Bligh running the show in Brisbane, there was a large flood in Queensland. The consequences were quite significant. But the economic consequence for Queenslanders were worse than should have been because the Queensland government and Queensland citizens did not properly insure themselves. And they are still under-insuring themselves.
But did Queensland pay the price for not having proper insurance? Nope. Instead, a flood levy that was paid by all Australians and not just Queenslanders was implemented to bail them out.
So what “insurance” is the Queensland government taking out to protect against the risk of commodity market volatility? None. Instead they are Jacking up debt and spending. This is called the Jackie Strategy named after Queensland Treasurer Jackie Trad. Although fellow Queenslanders Swan and Rudd may have grounds for an intellectual property claim – if you can believe that Rudd-Swan governance was intellectual.
They were from Queensland and they came to fleece the rest of us.