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Where’s the money coming from?

In the Courier-Mail, Stephen Wardill responds to my observation that LNP’s campaign promises don’t add up, and must imply large unnannounced cuts to services, by suggesting that they may instead imply large unnannounced cuts in infrastructure, specifically the Cross-River rail tunnel project. There is a simple way to resolve this: the LNP could say where they plan to cut, and by how much. This idea doesn’t seem to have occurred to Wardill however.

It’s also easy to check that cutting the Cross-River project will go nowhere near filling the gap in the LNP’s promises. The commitment in the last budget was $2 billion, and the total (assuming no Commonwealth funding) is about $5.4 billion over 7 years, with a target completion date of 2024. Scrapping the current budget allocation of $2 billion would barely be enough to pay for the reintroduced Royalties for Regions program, let alone the many other ideas that have been floated. And none of that goes anywhere near achieving the promise of a surplus on fiscal balance.

So, as Robert Menzies famously asked, “Where’s the money coming from?”

Wardill does make one fair point: the practice of providing costings at the last possible moment is not new and was done by Labor last time around. As with compulsory preferential voting, this is a piece of cleverness that has come back to bite them. Indeed, looking at this article on Labor’s costings release, the symmetry is amusing, and goes both ways.

From the LNP

At the last gasp, at almost the very last day of an election campaign they produce a three-page document that doesn’t add up,” Mr Nicholls said

And from Labor, a promise to this article on Labor’s costings release”>cut government advertising expenditure, just as Nicholls is doing today. As I said in my previous post

As for government advertising, not only are the sums involved relatively modest, but this is a promise routinely made and broken by Opposition parties in just about every election. Nicholls may not like government advertising when Labor does it, but, in office, he was happy to spend $70 million on the Strong Choices asset sales campaign.

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  1. chrisl
    November 11th, 2017 at 19:24 | #1

    Another day in the QLD election campaign, another rush from both main parties to promise $ for everything from basketball courts to swimming lessons.

    Government debt = $80 billion +.

  2. John Quiggin
    November 11th, 2017 at 20:35 | #2

    Net worth $194.936 billion

  3. chrisl
    November 11th, 2017 at 20:41 | #3

    Can they sell anything to pay the debts?

  4. Ikonoclast
    November 12th, 2017 at 09:19 | #4

    @chrisl

    Does this mean you wouldn’t want an income producing business with debt where the income from the business more than serviced the debt and all the overheads? Does this mean you would never borrow to expand a business where due diligence on the expansion indicates this would increase net profits… because in your view debt is ALWAYS bad?

    Debt may be good or bad, useful or damaging, to an entity (person, business etc.) relative to other factors. Saying or implying “debt is bad” as a statement in isolation yields no advance in understanding a given financial situation.

  5. Lt. Fred
    November 12th, 2017 at 09:45 | #5

    I was very bemused by that piece. Wardill basically says that the Lib economic plan need not necessarily be smoke and mirrors in its entirety – maybe they would corruptly cancel the country’s most important infrastructure project a third time, and instead squander billions on pointless election promises. This is supposed to be a defence!

  6. chrisl
    November 12th, 2017 at 10:23 | #6

    Iconoclast
    I never said or implied that all debt is bad. I am in plenty of debt myself! But if I sell an asset or two… Bingo! Surplus!
    However the QLD Government with $80 billion worth of debt can’t readily sell any of it’s $195 billion worth of assets. Most of those assets would not be income producing so there would be a shortfall in the interest payable.
    Which can only be paid by the taxpayer.
    And future generations of taxpayers.
    Sometimes people say government is just like a business and others say it is nothing like a business,whichever suits their argument.

  7. Collin Street
    November 12th, 2017 at 12:51 | #7

    The thing about being wrong is that, definitionally, you can’t understand _why_ you’re wrong, because if you did you’d be able to adjust your position to allow for that new knowledge and you wouldn’t be wrong any more.

    So if you want to learn from your mistakes you have to take other people’s explanations on faith, that understanding will come later.

    (The other thing about being wrong is that your conceptual errors – “a and b imply c” when that ain’t true – don’t exist outside your head and so can’t be falsified by anything anyone can point to: “take it on faith” goes double for “it doesb’t mean what you think”)

  8. Ikonoclast
    November 13th, 2017 at 06:42 | #8

    @chrisl

    Qld’s debt is nothing unusual and nothing to worry about. In figures to 2014…

    “What’s clear from that table is that the debt-to-GSP ratio in Queensland has increased considerably since 2006-07, and that most of this increase occurred under Anna Bligh’s Labor governments.

    And in comparison to other states, Queensland now has the highest debt-to-GSP ratio.

    However, this ratio remains relatively low in comparison to other G20 countries, including the Australian Commonwealth.

    The ratio is also significantly lower than 90%, which some previous studies have identified as the level above which long-term growth is reduced. (You can read more in these 2010 and 2012 papers from Reinhart and Rogoff.)

    But not everyone agrees on that 90% threshold; other studies have failed to identify any threshold and conclude that there is no relationship between debt and growth.” – From The Conversation – The true state of Queensland debt – Fabrizio Carmignani, Professor, Griffith Business School.

    Debt repayments and interest payments can come from income producing assets and from taxes. It is not necessarily necessary to sell assets. Some asset sales can be made on a case by case basis, especially where government has land it no longer needs. In other cases with natural monopolies like power, water and rail it is best for the state government to keep, run and earn from them.

    I would hazard a guess that our debt growth rate is roughly in line with our economic and population growth rates. It’s no big deal. Why do people go into debt panics over government debt? It’s only because the media, at the behest of neoliberal forces pushing privatisation, try to whip up hysteria about it.

    A state government is in a bit of a different position from a national government with a sovereign currency and money “printing” powers. However, institutionally, the Federal Govt could do more to loan Federal monies (as Bonds?) to the states at lower interest rates than the private sector. Oh, and talking about interest rates, they are at historic lows anyway. It’s a good time for governments to borrow and build new, much needed infrastructure.

    Don’t be a debt panic merchant. That’s what the neoliberals want people to be so they can work on the electorate and panic it into supporting asset sales which enrich the rich even further and strip the public of much needed public services and utility services at fair prices.

  9. Collin Street
    November 13th, 2017 at 11:01 | #9

    It’s an accounting identity: net government debt is net private credit.

  10. chrisl
    November 13th, 2017 at 15:12 | #10

    Iconoclast It is comforting to know that $80 BILLION in debt isn’t a problem. As you say interest rates are low and can never go up.GSP will ALWAYS go up because there will never be another recession so debt-to-GSP ratio will always stay under that 90%
    And John Quiggin has the answer to “Where will the money come from ?”
    More Debt.