ONE of the main tasks confronting the narrowly re-elected Queensland Government of Wayne Goss is to rebuild support for good fiscal management. It will be a tragedy for Queensland, and the nation as a whole, if it fails to do so.
Successive Queensland Governments have, over the past two decades, pursued a fiscal strategy -- unique among Australian governments -- based on a balanced budget, fully funded public sector superannuation, low taxes, and returning earnings within trading enterprises to fund capital.
This strategy has served Queensland superbly over the years, particularly during the 1990s.
It laid the foundation for Queensland's economic success over the past decade and it directly contributed to phenomenal job growth in Queensland.
It has set the fiscal benchmark for all other States and for the Commonwealth. Importantly, through the 1990s, while other governments, particularly the Commonwealth, plundered national savings, the Queensland Government contributed to national savings.
During the election, no party effectively championed good fiscal management. Both parties willingly participated in a bidding war which added between $1.2 billion and $1.5 billion to net outlays over the term of the next Government. Although the new Government should be able to meet these commitments while still maintaining a Budget surplus, it leaves no room for new initiatives. Worse, all parties gave support to the myth of a funding crisis.
Various interest groups and their academic accomplices have long demonised the Government's fiscal strategy, claiming that it strangled the public sector and has no resulted in a funding crisis in essential services and public infrastructure. The Government must expose these claims for what they are: myths.
When the Goss Government took office in 1989, recurrent spending in Queensland was substantially below the level of most other States -- about 25 per cent on average. But my research for EPAC found that this low level of spending did not result in lower quality services, but rather was achieved by greater efficiency and lower costs.
In terms of capital spending, Goss inherited a well-endowed budget sector. In 1989, the capital stock of the Queensland budget sector was (on a per capita basis) 10 per cent greater than the average of other States, exceeded only by Western Australia and Tasmania. The reason is simple: unlike most of the other States during the 1980s, the Queensland Government did not cut back on capital spending.
Under Goss, spending in the public sector has burgeoned across the board.
Between 1989-90 and 1994-95, recurrent spending grew in real per capita terms by 22 per cent -- twice the growth rate registered in other States, and easily the highest growth rate among the States. Capital spending on social services expanded by 35 per cent while in the other States it actually declined. As a result of this expansion, recurrent spending in Queensland is now just 8 per cent below and budget-sector capital spending is now 46 per cent above the level of the other States.
The expansion took place in all areas, but most dramatically in health, education and welfare. Spending, capital and recurrent, on health grew by 12.4 per cent in Queensland, five times the rate of other States. Welfare spending grew by 126 per cent, three times the growth recorded in other States. The only areas below the rate of other States was police and public safety.
On the basis of forward estimates, this expansion in budget outlays in Queensland will continue, and exceed by a large margin the growth in other States. Indeed, recurrent spending per head will in a few years exceed the all-State average.
The expansion in capital investment also took place in the Queensland public trading enterprises (PTE) sector. Under Goss, capital spending in the PTEs grew by 51 per cent in real per capita terms, compared with a 6.1 per cent reduction in the other States. As a result, in 1994-95 capital spending on a per head basis was 27 per cent higher than the other States.
If there is a problem with social services and infrastructure in Queensland, it is certainly not caused by lack of funding. It is also not caused by a shortage of staff. The public service has, in fact, grown markedly in Queensland (by about 3.2 per cent) during the Goss years.
How did the Goss Government achieve this dramatic expansion in spending while maintaining low taxes, budget surpluses and fully funding its superannuation liabilities? By what can only be called "a virtuous spiral", induced by years of sound and superior fiscal policy.
As a result of balanced Budgets and low levels of borrowing, the Queensland Government's annual interest bill is now about $1.5 billion below the level of the other States. It has also accumulated investments of more than $10 billion by setting aside funds for accruing superannuation. These funds earn around $800 million per year.
The high levels of capital spending, combined with low taxes and charges and low public sector debt, have attracted migrants and investors from the south, boosting the economy and job growth, and providing the State with more revenue. Despite the low taxes and charges, public sector revenue has grown more rapidly in Queensland than in the other States.
Sound fiscal management in Queensland has paid huge dividends. Now, however, it needs a champion -- the Government.
Powerful interest groups, the seductive myth of the funding crisis, and the lure of untapped tax bases are undermining it.
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