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Personal reflections by Adept Economics Director Gene Tunny (NB cross-posted at queenslandeconomywatch.com)

I caught up with Steve Austin on 612 ABC Brisbane yesterday morning to discuss Sir Leo Hielscher’s sterling record as Queensland Under Treasurer in the seventies and eighties and to compare our state’s previous stellar financial performance with the mess we’re in today. You can listen to our conversation via the player below.

Among other things, Steve and I discussed the significant challenge the current Queensland state government faces in dealing with the current teachers’ pay dispute: it is already borrowing to pay wages. Its revenue can’t even cover its recurrent, operating expenses, let alone generate an operating surplus that can contribute to paying for new public works (Figure 1).

Figure 1. Queensland General Government budget estimates

Source: Queensland 2025-26 Budget Paper No. 2.

The operating deficit ($8.6 billion this financial year) needs to be corrected as fast as possible. The Government doesn’t want to be compared to the Newman Government, which suffered politically as a result of its significant public service cuts, but an operating deficit is unsustainable. It is akin to buying your groceries on your credit card and not paying down the balance every month, but letting the balance grow and grow. Eventually, the household needs to make hard choices.

Even with its relatively low forecast growth of expenses over the forward estimates, the government still can’t reach an operating surplus in the final forward estimates year of 2028-29. It will run a $1.1 billion deficit.

At a minimum, I would reverse the 50-cent fare policy, which Crisafulli inherited from the previous government, which was unfunded and only added to the operating deficit. The government also needs to undertake a thorough review of its spending, and risk a comparison to the Newman government, or it will have to increase taxes. That’s an option, particularly given that Queensland still has lower taxes than the national average. Still, I wouldn’t support higher taxes, as I’d prefer the adjustment on the spending side of the budget, given the adverse economic impacts of taxation. Low state taxes provide Queensland with a competitive advantage as a destination for investment and talent.

Over the next few years, the costs of abandoning Sir Leo’s fiscal lessons (the so-called ‘trilogy’ I discussed with Steve) will become more apparent. Interest expenses will more than double to over $7 billion, diverting money from health and education. At the same time as the interest bill rises, we will need to fund the Olympics. The Government will try to avoid the immediate budget impacts of the Games by entering into Public-Private Partnerships (PPPs). Still, it won’t be able to prevent significant future costs via ongoing subsidies to facilities that will likely be uneconomic without government support. Hard choices will have to be made by the decade’s end.