Assessment of the Opposition’s Fiscal Strategy

We have completed a critique of the Opposition’s Fiscal Strategy. You can download it by clicking here.

The introduction reads:

The Labor fiscal strategy gives voters the worst of both worlds – inferior returns from tax payer dollars, and higher electricity costs. It also diverts income from Government Owned Corporations already allocated in the budget to debt repayment, raising the question of how it will meet election commitments and commitments to unions regarding public sector conditions. With this money being diverted towards debt, what job creation schemes is the opposition proposing to meet their ambitious targets?

At the same time, given past performance, it is highly unlikely to ever be fully implemented, and government policies in the energy area are likely to impair the value of the assets over time.

Given the future prospects for the fossil fuel industry, and current buoyant conditions in capital markets, future capital losses on the assets incurred by holding, not selling, could easily outweigh the meagre cash flow savings the opposition expects.

Also by maintaining debt at high levels they rob themselves of the flexibility to use debt proactively, for the state’s development. They also ignore the income generation possibilities of the government’s plan of investing proceeds of asset sales in community infrastructure, as well as the confidence and flow-on effects of a potential construction program funded by part of the asset sales.

While they contrast their policy to pay down debt with the government’s, and the government’s spending priorities, the correct approach would have been to model their scenario against a range of scenarios and a benchmark rate of return. Instead they have started from the position that continuing to own the assets is the best possible use of taxpayers’ money when it is likely a better business and consumer outcome would result from a different arrangement.

That they did not indicates this is not a serious piece of research and that Labor has not put enough thought into the asset sales proposition.

The policy has all the hallmarks of a document designed to answer the question “Where is your economic plan?”, rather than, “What do you seriously intend to do?” It seems to arise from a presumption that the best answer is business as usual when the last 10 years of government in Queensland suggest this cannot be the right one.

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