It's official, the magic pudding does exist -- in Queensland.
Last Wednesday, the Borbridge Governments brought down a Budget that did it all -- spending was up sharply, taxes were cut, the budget was balanced and debt slashed.
What's the secret? A huge inheritance built on years of sound fiscal management.
The Borbridge Government inherited the best possible financial position. The books were in surplus by over $1 billion. The State not only had the lowest level of debt of any government in Australia but it was debt free. It was also the only Government in Australia -- and probably in the western world -- whose public sector superannuation liabilities were fully funded. On top of this, Queensland had the lowest level of expenditure of any state, a tax take 20% below the level of other states and the most efficient set of public trading enterprises.
This inheritance gave the Borbridge Government, when it came to power in 1995, about a $2 billion head start over the Court Government -- even after adjusting for population differences.
Over the last three years the Borbridge Government has used and abused but not totally squandered its inheritance.
The inheritance has allowed the Queensland Government in 1998 -- an election year -- to boost capital spending by a whopping 14% and to a record level of $4.8 billion and to expand recurrent spending by 8.8%. Although Mr Court was hardly miserly in his last Budget, he only managed expand total spending by 6%.
It has also allowed the Queensland Government to cut taxes by $56 million in a full year; at a time when taxes are going up in WA. Indeed the Queensland Government cut many of the very same taxes, such as stamp duties on conveyancing and insurance, and motor vehicle registration fees, that were raised in the last WA Budget. As a result these cuts and those in previous years, an average home now costs $5000 less and a new family size car costs $500 less in the Sunshine State than in WA.
Borbridge's inheritance was so large, that despite his generosity, he still managed to produce a real surplus of around $500 million, fully fund the States super liabilities and cut debt in his 1998 Budget.
Things are not all sunshine in Queensland. The Asia meltdown is expected to hit the State economy and its finances hard. Moreover the inheritance has been serious run down and the public sector reform is faltering.
Nonetheless, the Borbridge Government and its successor will continue to benefit from years of sound financial management. And because of it are better able to weather storms -- where economic or political in origin.
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