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Money for nothing

December 11th, 2013

In the midst of proclaiming a budget crisis and sacking thousands of public servants, Campbell Newman’s LNP government announced that they were going to demolish the tired Executive Building, in which Newman and other senior ministers work, and get the private sector to build them a new one. This, we were told would cost the Queensland public nothing. As I pointed out at the time

it’s blatantly obvious that if you tear down a building and put up a new one with exactly the same purpose, you are taking on additional debt, whatever the accounts can be made to say.

That was obvious from first principles, but now the Auditor General has pointed out that the deal is even worse than that, saying

“Without a competitive sale process and given the significant difference between the book value and the sale price achieved, prima facie it raises the issue of whether the state can demonstrate that it obtained best value for money for the assets it sold.”

. This isn’t surprising. Whenever one of these “money for nothing” deals is pushed through, you can be sure that the public is being ripped off for more than if the payment had been out in the open.

The Opposition has estimated the net loss to the public at more than $2 billion, and that looks to me to be in the right ballpark.

As a comparison, if you take $100000 as a round estimate for the savings in salary, on-costs and so on from dismissing a public employee this luxury project blows, over its lifetime, the annual savings from cutting at least 20 000 jobs, the number originally proposed by Newman. This was later cut to 14 000, quite a few of them replaced by outside contractors. So, it’s probable that, over the first time of the LNP government, the loss on this one piece of public extravagance will wipe out more than half the savings made by the sackings. Let’s hope the first term will also be the last.

And, with the Abbott government doing its best to help at the Federal level, reports like this might finally help to demolish the silly idea that the LNP has some sort of advantage in economic management.

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  1. Pete Moran
    December 11th, 2013 at 12:19 | #1

    Auditors are such pesky clear thinkers compared to Commissioners of Audit.

    Is the QLD Auditor General’s job now in jeopardy?

  2. Hermit
    December 11th, 2013 at 12:37 | #2

    Apropos the truthiness of Queensland government agencies the competition authority just said the federal carbon tax will destroy everything that is good and decent. Trouble is they first declared the average annual home power bill would go up $270 then they changed it to $192. Some undue haste there. Then they said most of the increase of 13.5% was due to carbon tax. If they are talking the current financial year the carbon tax went from $23/tCO2 to $24.15, an increase of 5%.

    Truthiness aside I see the inner circle (govt + lobbyists) in Queensland are on language control. The Abbot Point expansion is all about ‘resources’. They should export asbestos because that’s a resource.

  3. December 11th, 2013 at 13:53 | #3

    They might be getting the money for nothing, Prof Q, but are they getting chicks for free as well? Enquiring minds want to know.

  4. Peter T
    December 11th, 2013 at 15:49 | #4

    “Conservatives manage money better” is one of those memes that survives any amount of reality testing (Clinton/Bush; Keating/Howard/Rudd; Blair/Cameron…..). I doubt this will dent it.

  5. Russ
    December 11th, 2013 at 22:11 | #5

    Whoops!! Time for a new Auditor General!

  6. Jim
    December 12th, 2013 at 11:56 | #6

    The State Treasurer said there was not enough time to do a proper benefit costs analysis. That was the excuse for a lack of analysis and transparency.

    Given the fact that the Government obviously has some costings available, and some other basic data (e.g. net leasable area etc), it would only take a couple of days (at most) to do a basic benefit cost analysis (or work out the efficiency gains required to justify the additional costs).

    Clearly the LNP simply did not want the scrutiny, or Queensland Treasury are simply incompetent. Both are highly possible.

  7. December 12th, 2013 at 23:03 | #7

    Peter T, perceptions of economic competence have shifted a lot in the US as a result of Bush. In 2004 most Americans thought Kerry would be better on the economy. They preferred Bush on defence, gay marriage etc. By 2008 economic issues were big winners for Obama.

    It took a lot to shift it, but eventually evidence seeped through.

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