While the claim from some neoliberal hardliners that the Queensland budget will encourage the Reserve Bank to lift interest rates is nonsensical, the likely last budget of Queensland’s Labor government is every bit the reckless spendathon that critics charged federal Labor with back in May.
By pumping up spending both this financial year and next on vote-buying initiatives like 50 cent public transport rides, a $1,000 handout to households, and lowering taxes via cutting rego and lifting the exemption threshold for transfer duties, the Queensland government has sent its budget deep into the red for years to come — without any of the justification federal Labor had.
Queensland Labor since 2021-22 has lifted spending in cash terms by nearly 30%, compared to 18% at the Commonwealth level. Spending in 2024-25 will be 11% higher than forecast in last year’s budget. Part of that has been funded by a surge in coal royalty revenue, which doubled in 2022-23 and will come in nearly double estimates for 2023-24 before returning to more normal levels — though still a little elevated — next year. Mostly, however, the extra spending and tax cuts will come from deficits — $11 billion next year, followed by $9.5 billion, $7 billion and $4 billion over the forwards.
But unlike their federal counterparts, the Queenslanders have no economic justification for their largesse. While the national economy is managing just 1.1% growth currently and is expected to limp to just 2% in 2024-25, Queensland is looking at comparatively rude health with 3% growth in gross state product this current year and next. If Jim Chalmers’ descent into deficit looks more and more like it will keep a tepid national economy out of recession, Queensland Labor is splashing money around in an economy basking in extended sunshine.
“Cost of living” is of course the cry from the Miles government and Queensland Treasurer Cameron Dick, who boasts that measures like the cash handout for electricity prices, 50 cent public transport fares and lower rego will reduce inflation to just 2% next financial year. That’s harder to justify for the change to the first home buyers’ threshold for transfer duty, which will simply free up more cash for first home buyers to spend on housing, increasing demand.
The real driver, of course, is the October state election, where Labor faces the prospect of a drubbing at the hands of a small-target LNP. Labor’s forecast deficits also lay a fiscal trap for the LNP, which might feel forced to begin its term with a Campbell Newman-style austerity budget to rein in debt — one that will define that government and render it unpopular with the electorate from the get-go. The 50 cent public transport fares is the most blatant trap, given it only lasts for six months from August, leaving the LNP with a nasty jolt for commuters on February 1.
Desperate spendathon budgets can save governments. Part of Scott Morrison’s plan in 2019, carefully developed and refined by C|T Group and that lobbyist’s Liberal strategists, was an array of micro-targeted pork-barrelling, similar to Boris Johnson’s commitment to government spending in the north of England that delivered him a strong election win that year as well. But more often they fail — the Howard government completely abandoned fiscal discipline in its last days, so much so that it allowed Kevin Rudd to pick up the mantle of budget responsibility and define the Liberals as spendthrifts. And Morrison couldn’t repeat the same trick twice. Bribing the electorate only works if the alternative party has given the electorate a reason to fret. And that’s definitely not the LNP.
The $5.7 billion this year and $10.8 billion next year is money down the gurgler. October is coming, and it won’t be pretty for Queensland Labor.
