Newman could do better

Renewed questions have been raised about the merits of public sector employment reductions in light of worsening opinion polls for the three-month old Newman Queensland government.

A recent Galaxy poll revealed that state Labor's primary vote in the opinion polls has increased by seven percentage points to 30 per cent, a considerable improvement for a state party literally on its deathbed since the election of 24 March 2012.

Other polls show that the popularity of Premier Newman has appreciably declined, with some figures suggesting that the Premier could lose his own seat if another election were to be held today.

There is suggestion that the Newman government's stance on public service jobs might even be contributing to the slight bounce in federal Labor's parlous opinion poll standings.

Unquestionably the organisational ability of public sector unions to get out a protestor crowd in relatively short notice has presented the political optic of growing animosity toward trimming the size of the state government.

But the truth of the matter is that the size of the Queensland public sector had grown out of control and needs to be reduced, especially under circumstances in which the jobs-generating private sector continues to feel the strain of the post-Global Financial Crisis economic stagnation.

The Costello audit commission interim report provides the tale of the tape concerning the unsustainable growth of the state government under the previous Beattie and Bligh governments.

With a key policy objective to wipe out the Bjelke-Petersen legacy of Queensland as the lowest taxing state, the Labor administration aggressively expanded public sector expenditure particularly in the areas of education, health, welfare services and housing.

From 2000-01, the first full year of the GST reforms, to 2010-11 growth in general government expenses had closely tracked the growth in revenue intake.

However it was during the Mining Boom Mark I that the state government loosened its belt allowing spending growth to escalate in unsustainable fashion.

As Treasurer and, later as Premier, Anna Bligh presided over perhaps the strongest growth in general government expenses the state had ever seen, with expenses growth averaging about 11 per cent per annum from 2006-07 to 2010-11 and almost double that of revenue intake growth.

Far from all of the proceeds of this spending growth trickling down in the form of services to final consumers, a significant share of additional spending since 2000-01 was siphoned off through additional public sector workers employed and higher salaries and benefits for these workers.

Employee expenses increased by an average of about nine per cent per annum, with wages growth rising by about five per cent per annum with growth in employee numbers accounting for the remainder.

When expenses growth consistently outstrips revenue growth, as it did during the latter years of the Beattie-Bligh governments, the certain eventual outcome is budget deficits spilling over into borrowing as government seeks to maintain its high-spending momentum.

And so from the best fiscal circumstances in the country, with low taxes, efficient service provision, budget surpluses and minimal debt, Queensland's position markedly deteriorated with the results being an increasingly uncompetitive tax position, inefficient services and a bloated public sector, ballooning debt and the worst budget bottom line in the country.

It was the issues of the falling efficiency and quality of state government which Newman campaigned heavily and subsequently won a resounding mandate from the Queensland public to fix.

With public sector employment costs representing the largest operating cost item in the Queensland state budget, it is prudent that the government seek redundancies in areas which do not provide sufficient value for money for the ever-burdened taxpayer.

Just like households and businesses that ensure their budgets remain in check, the vigorous search for expenditure efficiencies should be at the core of what any competent government should regularly perform as the steward of public finance.

By contrast public sector unions will not countenance any reduction in public sector employment under any circumstances, regardless of the state of the budget.

This might be a populist position, but is a disreputable one in public policy terms when the short term objective must be to consolidate the budget and trim public sector size providing more room for private enterprises to grow.

Even so, the Newman government has already bowed to union pressure to some extent and there is worrying speculation that it will do so again in light of the latest opinion polls.

During the pre-election campaign the Liberal-National Party vowed not to privatise government assets during the current term, in deference to the union position at the cost of policy flexibility.

The reluctance to privatise is not defensible, especially when this approach could provide sales revenue to plug the budget gap and when privatised assets can be operated more efficiently in response to market forces.

To date only 4,000 redundancies of largely contract workers in a state public service of over 200,000 people have been achieved, however the Premier has now hinted that the total public sector employment cuts could be considerably less than the originally miniscule 20,000 target.

In the interests of sound financial management and promoting private sector recovery, the state government should at least stay the course regarding its original public sector employment rationalisation plans and, in fact, go further in its quest to deliver budget sustainability.

For example, is there a need for a public sector works department in the modern world of private sector infrastructure financing and provision?

Whose economic interests does it serve to maintain the corporate welfare state development department, or the anachronisms of agriculture, mining, energy and science departments?

Is there a legitimate role of government in the arts, sport, and multicultural affairs?

Should governments remain involved in the provision (as distinct from funding) of education, health and other social services?

It is these and other serious questions about the appropriate role of government that the Newman administration should entertain, and actively engage the 'silent majority' community in a careful discussion.

The government could sell this extended fiscal consolidation program as part of a broader economic growth strategy, incorporating a return to low state taxes and slashing regulatory burdens attracting the support of small businesses and individuals who would come to enjoy the economic fruits of the reform agenda.

Regardless of what fiscal and economic strategies the Newman government ultimately pursues, it should be mindful that it is it, and not the senior executive of the public sector unions, which has been charged by the Queensland public with the great responsibility of fixing the waste and mismanagement of the Beattie-Bligh years.

Should it deliver on its undertakings to return fiscal sanity to Queensland the Newman government will find, as other reformers in Australia and internationally have shown, that policy consistency will bring its own electoral reward when it matters at the 2015 poll.