Big Budget Challenge for New Queensland Treasurer
Personal reflections by Adept Economics Director, Gene Tunny (NB cross-posted at Gene’s Queensland-focused blog, Queensland Economy Watch)
The recent Courier-Mail article reporting that Townsville University Hospital can’t afford to fix its elevators reminded me of something a former state Under-Treasurer told me when I researched my 2018 book Beautiful One Day, Broke the Next. He told me governments like spending money on brand new infrastructure, but they often don’t allow sufficiently for ongoing maintenance and refurbishment.
I’m sure the resources could readily be found if the state budget were in better shape, but ever since state debt started growing rapidly from the late 2000s, state governments have had to divert more money to pay interest to bondholders. They can’t spend this money on frontline services like health and education. In the mid-2000s, just before the fiscal recklessness started, general government interest expenses only absorbed 0.5-0.6% of revenue. Now, at around $2.4 billion annually, they absorb 2.7% of revenues and the latest budget update projects that by 2027-28 they are estimated to be $6.6 billion or 6.9% of revenue (Figure 1). The increasing debt service burden is a significant reason state governments now struggle to fund essential services. Previous governments borrowed large sums of money to finance new infrastructure that couldn’t pay for itself and instead burdened the budget with debt service and ongoing maintenance and refurbishment expenses.
The new Queensland Government faces a mighty challenge in budget management. It must address service delivery failures while finding additional money to respond to natural disasters and deliver the Olympics, keeping the debt under control and avoiding a credit rating downgrade.
I look forward to the new Queensland Treasurer’s thoughts on the state economic and fiscal outlook when he addresses a business lunch the Economic Society of Australia (QLD) is hosting at the Sofitel on Wednesday, 9 April. I am the President of the Society, but the views expressed in this post are my views and should not be attributed to the Society. You can learn more about the lunch and book tickets via this link:
Published on 2 April 2025. For further information, don’t hesitate to get in touch with us via contact@adepteconomics.com.au or by calling us on 1300 169 870.