Qld Economic Strategy

My editor wanted a piece on the Beattie Govt’s economic strategy in the context of two by-elections being held this weekend. So here it is – with an additional graph that couldn’t go into the Courier Mail.
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Peter Beattie wants the worthy denizens of Redcliffe and Chatsworth to send John Howard a message at the coming by-elections. I wonder if that’s because he doesn’t fancy what he might hear if they sent him any messages?

About the health system for instance.

That’s the health system which, according to Royal Commissioner Tony Morris, harboured gross negligence one day, and murder the next. And hushed it up month after month.

Then again Peter Beattie just happened to be holding the parcel when Dr Patel’s merry rampage stopped the music. I expect the state’s health system has been a shambles for decades. So I’ve got a deal for Mr Beattie. I won’t blame him for the miasma in health if he’ll stop taking so much credit for Queensland’s economy.

Both Beattie’s State Government and Howard’s Federal Government have presided over a torrent of good economic news. Yet their main contribution to date has been not doing anything too stupid.

Until last August, Queensland unemployment had typically been about one percentage point above the national average. But its employment has been growing like topsy by over 5 percent in the last year bringing Queensland’s unemployment to 4.9 per cent, just below the national average.

Further, investment is strong and strengthening, with analysts projecting private commercial construction to rise by nearly a third this year. $850 million at Dalrymple Bay, $1 billion for coke manufacturing at Rockhampton, an $850 million multi-use development in Surfers’ and on it goes.

Peter Beattie can’t take much credit for this. The Hawke Government’s tariff cuts continue to help exporting states like Western Australia and Queensland.

More importantly, we’ve segued almost seamlessly out of the housing boom which we were told would end in tears and into the next boom. This one’s driven by China’s and India’s voracious appetite for minerals.

And much of the surge in investment will open the arteries of our mining, transport and port infrastructure to allow us to get more of that dirt of ours steaming northward.

Queensland tourism is also booming and will continue to grow at around double the rate of the rest of the economy for the foreseeable future. And which state capital had 5 percent growth in house prices compared with the national average of nil? Where else but Queensland?

But here’s some news the Government won’t say much about.

For all the economic analysts’ confidence in Queensland’s capacity to out-grow the rest of Australia, its productivity, and so the wages it can afford to pay its workers, are both way below the national average. Queensland produces around $31,500 per person, putting it ahead of only South Australia and Tasmania. All other states have much higher productivity at around $37,000 per person.

The top line in the attached chart shows Queensland’s proportion of Australia’s population with the bottom line showing its proportion of Australian output. The gap is big, long standing and, like most things in economic development, change is happening at a snail’s pace. Peter Beattie won’t be taking any credit for this, and that’s part of our deal as long as he doesn’t take credit for the good news!.

Qld chart.gif
Source Access Economics, Business Outlook

Why are Queenslanders less productive? First, Queensland’s economy is disproportionately oriented towards relatively lower skill, lower wage services like hospitality, agriculture, retailing and wholesaling. The good news is that these sectors offer good job prospects for women and younger workers. So they reduce unemployment.

Second, Queensland is also very decentralised. That robs local services and manufactures of scale economies and increases transport and infrastructure costs.

I’d give Beattie one cheer for his Smart State initiative. Some of it is just ‘re-badging’ initiatives that would occur anyway. And plenty of money has gone towards subsidising non-smart employment that might well have found its way to Queensland anyway within Virgin Blue Airlines and Movie World for instance.

Still, I’d rather be engaging our energies on positive and unifying political projects in bettering ourselves, rather than the negativity and division that gets the headlines and so would dominate politics otherwise. And the Smart State theme is not all marketing. It has genuinely effected State Government priorities though it will be decades before we know if Beattie’s initiative has succeeded sufficiently to allow some other politician to take the credit.

Two cheers for Beattie’s focus on Government ‘net worth’ rather than debt. We all care about how much we owe on our house, but we’re much more interested in our equity or our ‘net worth’. It should be no different for Government. Peter Costello and Wayne Swan take note!

But I’d give three cheers if Peter Beattie would be the one to get back to the economics textbook and finally point out how scantily clad that emperor is who wanders around proclaiming the virtue of zero or negative debt even where debt will help us grow the government’s and the community’s net worth.

If you’re using it to build assets for the future, then its fairer, smarter and more efficient for taxpayers of the future to pay by paying interest on the debt. That way Queensland could cut tax and/or afford more spending for the future on infrastructure, and making Queenslanders smarter.

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David Tiley
2022 years ago

State governments are particularly what Keating would have called egregious on this topic.

Obviously it is not too smart to stand there saying that prosperity is just a giant spin the bottle game as far as the government is concerned, but the claim to be behind it all rings pretty hollow.

It contradicts personal experience. I hate it when a state film agency stands in front of us and tells us how much “it has accomplished” rather than saying “this is what you have accomplished and we hope we are of use in this.” Particularly when the buggers put “leadership” into their charter.

We know who does the work and takes the risk, and who goes home at five oclock and goes to conferences for free.