Government needs radical new course to escape debt
With annual interest payments on Queensland's 'general government' debt alone likely to cost the same as the new $4.6B Airport Link which opened in Brisbane this week, Queensland University of Technology (QUT) economist Dr Mark McGovern says a radical rethink on the management and servicing of debt is needed.
Dr McGovern, a senior economics lecturer at the QUT Business School, said $3.5B was the estimated interest bill on last year's debt and this was expected to grow to $5.3B by 2015-16.
He said the debt itself wasn't the real problem but rather how it was being dealt with and said employment cuts, tax rises, asset sales and the like were not an adequate solution.
"The rivers of debt are rising and we need to introduce more effective financial-management strategies to deal with public finance issues across the country," he said.
"Real Australian interest rates are historically high, adding to the debt burden of not just the Queensland government but the whole of the country.
"You've got to ask 'why are interest rates so high?' and as importantly 'why aren't more effective financial strategies being implemented?'
Dr McGovern said there was a danger that the debt problem was currently being oversold by the State Government and this could further depress economic activity and investment.
"Queensland's debt is large but all is certainly not lost as there are effective ways of managing debt within a federation such as Australia," he said.
"Use of a state development bank is one option and tax-deductibility on select deposits (as recommended by the Henry Review) could allow marshalling of funds at more attractive rates.
"Seeking superannuation funds under current conditions as is proposed in NSW is not generally a prudent option."
He said gross 'General Government' debt was estimated by the Commission of Audit to be $64B at the end of June 2012.
"They then expect this debt to reach $92B by 2015-16 and $100B three years later. That's up 50 per cent in just four years without any evident real revenue gains, which is ridiculous.
"Queensland's available revenue is too small to even meet the interest payments under current arrangements.
"Sensible financial restructuring and effective fiscal management are both required, and we are really just taking the first steps in this necessary direction."
Media contact: Rose Trapnell, QUT media team leader, 07 3138 2361 or 0407 585 901 email@example.com