Big spend-up misses chance for real reform

A major disappointment of the mini-budget (which incorporates an early mid-year budget review) is its revelation that the government not only adopted measures to raise additional revenue but failed also to effect any net saving in operating expenditure.

Indeed, without the policy additions to net non-health spending of $200 million, there would have been virtually no reduction in the estimated operating surplus to $718 million.

It is difficult to believe that, in a budget with operating expenditure totalling more than $26 billion, it would not have been possible to find savings of, say, two per cent or about $500 million.

As previously pointed out, Queensland spending on general public services is about $500 million above the state's average and appears to include items ripe for pruning.

The combined effects of the spending and revenue-raising measures and mid-year review reveal only relatively minor changes in the state's overall budgetary and financial position in 2005-06. Contrary to the impression conveyed by the premier that economic growth would fund much of the increased health spending, no change has been made to the forecast of 4.25-4.5 per cent growth in real GSP over the period to 2008-09.

However, with the revenue measures, total revenues are estimated to provide an extra $1.7 billion in this period, financing about 70 per cent of new health funding. It is the net additions to operating spending that have moved Queensland close to the position where its general government sector will rely on borrowings or the running down of assets to finance almost all its capital spending.

In the short term this is of limited concern, given that such assets exceed liabilities. The main concern with this mini-budget is its failure to promulgate basic reform.