While the state's usual big-ticket items of health and education have had an airing in this election campaign, the economy has taken centre stage in political debate. After all, without a strong economy there is little chance of quality government services being delivered from Cooktown to Coolangatta.
One of the key talking points of the campaign has been the Liberal National Party's plan to return Queensland's Budget to a sustainable position while Labor has been trying to deliver the knockout blow to the LNP's $1 billion savings agenda.
In response, Treasurer Andrew Fraser recently said that LNP leader "Lawrence Springborg has almost $1 billion worth of explaining to do". Ironically, this missive comes from a caretaker state Treasurer who handed down a $1.6 billion Budget deficit which led to the recent downgrade of the state's credit rating.
Prime Minister Kevin Rudd also intervened, criticising the LNP Budget savings figures. It is intriguing that he should offer a view on state fiscal management, given his Federal Government has also articulated no plan to eliminate the cumulative $111 billion Budget deficit he created.
In the latest salvo fired in the economic debate, Labor engaged ANU political scientist John Wanna to comment on the LNP plan. Despite Premier Anna Bligh using Wanna's analysis like a proverbial rabbit out of the hat during the leaders' debate, it is not without its shortcomings.
Part of the problem with Wanna's analysis is that it is based on a set of generalisations with little evidence used to support his case. Wanna criticises across-the-board spending cut announcements as being too vague and general. This is despite governments using efficiency dividends and other broad-based savings measures as a matter of course.
Wanna warns that broad-based spending cuts generate a constituency resistant to the cuts. However, this is equally the case, if not more prevalent, with tailored spending reductions where concentrated beneficiaries of the status quo are more easily mobilised to fight cutbacks.
On the other hand, as was the case when John Howard and Peter Costello or then Victorian premier Jeff Kennett were confronted with Budget deficits at federal and state levels respectively, broader spending reductions are more readily supported by the mainstream community as everyone shares in the fiscal consolidation effort.
Wanna acknowledges the spending growth in some key portfolios, but seems to imply that the current arrangements are optimal. Given the clear structural defects in the state Budget, they simply are not. If the Government instead had increased its spending in line with the Consumer Price Index and population growth, Queenslanders could have saved a cumulative $14.3 billion since 1998-99.
Alternately, if the Government spent in line with economic growth it would have spent $23 billion less over that time. Every Queenslander would have been more than $5300 better off.
While Wanna is correct to suggest that State Government expenditure is subject to cost pressures, he appears to overlook the role of explicit policy decisions in driving the exorbitant spending growth. In the 2008-09 mid-year fiscal outlook, more than $638 million in extra non-capital spending alone was announced by the Government. This was on top of budgets through the last term of government outlining new policies running into the many millions of dollars.
There are many different ways in which sustainable government spending reductions could be achieved. One way is to go through departmental finances with a fine tooth comb, reducing the use of consultancies, identifying savings in IT service usage and in other areas. Changes to existing programs, for example altering indexation arrangements for grants and subsidies, can also deliver cost savings.
Another way is to look at the division of government and private sector roles in a more systemic manner. With technological advances and falling costs, the private sector has a far greater capacity to deliver services such as schooling, hospital care, transport services and infrastructure development.
As economist Des Moore identified in his 2006 Commerce Queensland report on the role of Queensland government (to which I was a contributor), such reforms could lead to spending reductions in the order of $1 billion to $1.5 billion a year.
Although Wanna's defence of the status quo is ultimately found wanting, he did come up with the gem that "major savings initiatives involve considerable political commitment to see through". It is instructive that one of the sparring partners has outlined their commitment to run a tighter fiscal ship, the other has not.
ADVERTISEMENT
No comments:
Post a Comment