Abbott should look at QLD Libs

There’s actually some sense emanating from a political candidate at the moment. It’s certainly not at the Federal level. But in the Queensland election, the Queensland Liberal National Party leader Campbell Newman is making noises not too far from reasonable. The AFR has an exclusive interview with Newman in which he outlines his economic plan:

As a pitch to the business community, the LNP has vowed to cut red tape by 20 per cent, increase the payroll tax-free threshold to $1.6 million and fast-track public private partnerships to boost economic growth in the state, which was hit hard by the global financial crisis.

…Mr Newman has announced the establishment of a commission of audit – along the lines of the audit process in Victoria after Jeff Kennett ousted Joan Kirner in the mid-1990s – to conduct a root and branch review of the state’s finances to en­able an assessment to be made of areas of strength and weakness.

LNP deputy leader and treasury spokesman Tim Nicholls told the Financial Review  the aim of the 100-day program would be to “demonstrate in a very short period of time the implementation of our policies” and to make it clear that Queensland was “open for business”.

Mr Nicholls would not be drawn on possible cuts in public spending to enable an LNP government to return the budget to surplus by 2014-15, and to pay down state debt which is expected to reach $60 billion this financial year and top $85 billion by 2014-15.

Queensland is likely to deliver a budget deficit of $4 billion this financial year.

Mr Nicholls said: “What we’ve said is that we want to have a right-sized public service that delivers the services that people need. We don’t want a big public service and we don’t think growth should just happen in it.

…Mr Nicholls said Queensland’s revenue had been growing at about 6 per cent annually while expenditure had been increasing by about 9 per cent. This was unsustainable, so a major restructure of government departments was also on the cards.

“That doesn’t mean cutting; it means slowing down the rate of growth [in expenditure],” he said. “That will drive the surplus and also reduce the need for debt.’’

…Mr Nicholls said the LNP would rely on economic growth to help restore the budget to surplus.

“We are never going to save ourselves into a surplus,” he said. “We need to grow the economy as well.”

Well, there’s some sense injected into the political classes obsession of cutting spending to achieve a surplus. At the Federal level it’s not so simple, there is a vital need to demonstrate a clear path to surplus to support the government’s off-balance sheet obligations such as implicit guarantees to the banks offshore borrowings. But this is the first time I’ve seen an acknowledgement by a Coalition politician that in the contemporary world of private saving and balance sheet repair, active government cuts are only going to lead to lower growth. Federal Labor has taken a similarly sensible approach to its rebuild of a surplus, using a commitment to a 2% cap increased spending per annum since 2009. Though, it’s since found that impossible to achieve, which is no doubt why the policy is rarely referenced. Still, kudos to Mr Newman for at least making sense. And the incoming Abbott government could do far worse than adopt a similar frame of reference. Dr “No” may not want to do so given Labor is already on the territory but they are failing at it.

Newman made some more sense on planning:

…During his interview with the Financial Review, Mr Newman laid heavy emphasis on the need to “un­clog” the planning process, facilitate approvals for big resource projects at state level and the release of land for housing in local communities.

“The [Labor government has] completely bogged the state down in red tape and bureaucracy,” he said.

I’m not sure how effective  an LNP government can be in freeing up the planning process for Queensland housing supply given the bottlenecks are often at the local level as well. But again, Mr Newman is at least making sense. As the Unconventional Economist has illustrated so convincingly, housing supply bottlenecks make us all easy prey for the spruikers of the property industry because there is no pressure release valve for housing demand when it waxes. And restrictive urban planning also leads to perverse outcomes such as far flung urban enclaves.

Obviously these are only a snapshot of Mr Newman’s economic plans and me might also read this as a mindless Coalition debt hawk seeing some light or, indeed, just another polly hell bent on spending given he actually ran up big debts when ran the council. But Mr Newman’s vision does gesture at some of the basic principles of the contemporary economic world. That, at least, is a relief.

Comments

  1. “in the contemporary world of private saving and balance sheet repair, active government cuts are only going to lead to lower growth.”

    This is the corollary of saying “any government expenditure is good no matter how wasteful”

    We have a level of government that we cannot afford. (Indeed we cannot afford the level of Service sector that we have) Holding Govt expenditure where it is at while bleeding the private sector for taxes (Effective Land tax increases of 70% per year every year for 5 years!)does not actually encourage a lot of employment.

    • I am sure you have a balanced enough perspective, flawse, to recognise that the potential for inefficiency in government spending is of nothing compared to the repeated inefficient allocation of capital and associated waste resulting from private sector decision making, whose own excesses and corruptions are in theory supposed to be curtailed by the superior moderating mechanisms of free markets. So much for that.

      • thats the first time ive seen anyone argue that govt spending is more efficient and better allocated then the private sector.. you may have just rewritten 300years of economic history, well done

        • Is that what I just said TSpencer ?

          That’s not the first time I’ve seen someone on this site so completely miss the nuance of another persons argument. Welcome to the club.

  2. cutting expenses : i guess he will want to cut into police, nurses, firecrew etc.. isnt it.I dont think so.

    or as libs do, cut into infrastructures and get labor to rebuild them when they are crumbling at great expenses (and deficits ) later on.

    We should get rid of states, that would save plenty of red tape.

    • I see your point, dam, but as H & H pointed out in his last paragraph above, Cambell ran up the debts as Lord Mayor by spending big on infrastructure – mainly roads and tunnels – to catch up on years of Labor non-spending. The opposite of what you’d expect, for a change. I think he’ll pick up a few votes around Brissie in particular on the basis that he said he’d do stuff, and then he did it.

  3. …fast-track public private partnerships to boost economic growth in the state…

    Uh, oh. Should this really be considered a positive? Elsewhere hasn’t this just resulted in annuities in (almost) perpetuity to corporate interests who have taken states to the cleaners?

    A bare minimum standard for this would have to be full transparency and disclosure, none of this corporate confidentiality bullshit. If you want to deal with a state government the terms should be full disclosure with all documents in the public domain otherwise piss off.

    • Brisconnections, Reliance Rail, Lane Cove tunnel – What was it that Einstein said about doing the same thing again and again, and expecting different results.

      • Michael West has written a lot over the years about the stuff ups in Sydney. In Vic the most recent example is the desalination plant. Going back 10 years we had the ALP commission a report (that they buried) that told them to build a rail link to the airport but their pals in Citylink put a stop to that.

        • Too many vested interests eh Hugo. Tullamarine airport makes huge amounts of money from parking too so an airport rail link would bite into that as well. We are at a stage where vested commerical interests trump the public benefit every single time…

          The problem is that state governments have been managed like a private sector slush fund over the years (ridiculously expensive public private partnerships) and are ALL broke. There’s also some hugely expensive fixed infrastructure that people have to be shoe-horned into using (like Citylink, the Desal plant, in NSW the Lane Cove, Cross-city etc) that’s going to be a drain on residents for years to come.

          Solution? Get rid of State Governments.

          • I don’t have a problem with getting rid of state governments but I suspect that whoever is involved representing the public would still behave incompetently or corruptly. What is needed is absolute transparency. These deals should not be hidden behind the veil of “corporate confidentiality” etc.

            All documents related to PPP should be in the public domain.

            (that miki thing in melbourne is another thing that really makes you scratch your head and wonder what the frak they were thinking. We could have tram conductors on each tram and station masters on each train station and be saving huge dollars versus these new technologies “solutions” to a non-problem)

    • “A bare minimum standard for this would have to be full transparency and disclosure, none of this corporate confidentiality bullshit. If you want to deal with a state government the terms should be full disclosure with all documents in the public domain otherwise piss off.”

      Cannot overstate how much I agree with this. After all, the people via their taxes are a party to the deal anyway and so should have access to the information about it.

  4. George Locust

    “cut red tape and reduce waste”
    It’s the same old vague determination every time.
    Nobody could argue against it of course.
    But if it were that easy i believe it would have been done already.
    Nice principle to have of course, but i just dont expect that this old chestnut saves the new government from making tough decisions.

  5. Ah yes, and his 4 pillars of the queensland economy that he is going to restore?
    Those would be
    1 Tourism
    2. Agriculture
    3. Mining
    4. Construction

    So we will be creating an economy that is totally dependant on external forces wanting to buy our product.

    I will be fascinated to see how the government manages to make tourism rise again- in my not unlimited travel experience government driven tourism is rarely a great experience.

  6. MB is such a great political experience. Note all the politically balanced comment.
    Of those above how many work in the Public Service (including universities)?

    Anyone who thinks there is not a HUGE amount of waste in the PS works in it.

    • Unfortunately a large part of the waste is to satisfy the electorate’s demands for accountability and as a result there is a overwhelming bureaucracy that exists to avoid mistakes so that the senior managers and politicians won’t loose their jobs.

    • drsmithyMEMBER

      I spent the first few years of my career in public-service-by-proxy (one of the Go8 Universities), but have since spent my time in private industry (Australian and American employers).

      I’ve yet to see any evidence that private industry is less wasteful than the public service.

    • Have worked in both private and public entities, I can certainly vouch for the fact that “wasteful” spending is rife in both places!

      On another note, first world nations being more efficient (in terms of wasteful spending either public or private) than developing nations is also load of BS.

  7. Having said that …yes Hugo…that has been the sort of ‘cutting’ that has gone on in the past which has just made govt expenditure a worse problem than it was before!

  8. More resource projects, more Dutch disease, more destruction of trade exposed non-resource industries, less intergenerational equity, more global carbon emissions, more wealth concentration, less long term sustainability.

  9. I believe without reform of the whole state/ fed revenue agreement and responsibilities , ie the states being responsible for 70% of the services but have bugger all taxing abilities except property related, that the LIbs will have no chance of “growing down the debt and they will have to cut and sell.

    I have come to the conclusion as well that the Federal government needs to take over the liabilities of the states defined benefit schemes as well.
    These liabilities were created when the states had greater sources of revenue.

    I presume Serco and Veoilia will help in a consultant role when the Libs get in as well.

    Currently the NSW govt has cut 5000 public sector jobs but employed 12000 contractors.

    I am not sure what assets the QLD state govt has left but I am sure they will be sold off, likly to Swiss or Chinese interests if they are profitable and the shitty assets will remain a drain on the state’s finances. As Flawse would agree to keep financing the nations CAD.

    Just a few thoughts, bottom line though govts should be rewarded when they increase GDP based on revenue not asset values based on easy credit.

  10. Hugo Chavez, there was no ‘reply’ button under your witty observation above about Myki.

    Myki was a sad case of a politician being swift-talked into something we really didn’t really need that was hugely expensive and has turned out to be an almost total dud – I should know, I use it almost every day and things go wrong contantly with being over-charged, out of order etc etc. Think of the famous Simpsons episode where they got their MONORAIL…

    And you are right, it didn’t make any sense whatsoever. When they had staff on trams and at stations we didn’t have this problem with antisocial behaviour that we do now… that’s necessitated putting armed guards on station platforms at night. It was a total false economy getting rid of staff off stations… another regrettable Jeff decision that actually COST money in the longer term, just like privatising the power companies.

    • people could debate getting rid of conductors, station masters etc. if the technology replacement was cheaper — BUT IT IS NOT, in fact it is multiples of what it costs to have humans do the work. Why aren’t there some labor party stooges in jail?

      It is just unfortunate that people who make these decisions do not lose their jobs or pensions and in the case of corruption, do not go to jail.

      The monorail episode could be renamed “ALP rule in victoria” — except we didn’t even get a good song out of it.

      kennett was left with a bankrupt state, because that is the way the ALP at the state level tend to always leave things. I am against privatising power infrastructure however kennett did seem to sell near the market peak — unlike the clowns in NSW. kennetts decisions may not have been 100% but he had to find $ thanks to the incompetence and corruption that preceded him.

  11. why not cut both govt expenditure and govt revenue, with expenditure cut in higher %…

    less pink bats and more incentive for private industry to do what they do best..

    nothing entrepreneurial comes out of bureaucracy

  12. Yeah, I agree with you partially on the point of Jeff but I view the situation that Labor got into in the late 80’s as another example of the private sector ripping off taxpayers.

    Victorian Economic Development Corporation and State Bank of Vic went out on a limb to loan for silly risky projects with very little government oversight (even though they were mucking around with taxpayer money). Exact same thing happened with the State Bank of SA. John Cain et al were to blame for not being careful enough but unfortuately they were following the 1980’s finanical spin doctors at the time who told them to spend that money to attract private enterprise… the rest is history!

    As someone else mentioned earlier on with Reliance Rail, Brisconnections etc etc you don’t keep repeating the same mistakes in the hope of getting a different outcome…