Privatising the Sunshine State

Schools policy would also benefit from giving principals greater autonomy over staffing decisions, increasing their capacity to manage the workforce effectively and reduce restrictive union practices.

The second, or what might be called the indirect, approach would be to further encourage the development of private sector services that compete with government services, or that take over the public sector role where that appears likely to improve efficiency and quality.

In Queensland, the government has been giving limited encouragement to the development of competing private sector services. However, the driving force behind the considerable expansion of such services since 1997-98 - with associated savings to the Queensland budget - has clearly been the community’s increasing acceptance that the private sector is offering higher quality services and the wider choice that modern society wants.

For example, the proportion of students attending fee-charging non-government schools has increased from 28 per cent to over 30 per cent since 1997-98, and the almost 200,000 students attending these schools in 2005 effectively saved the Queensland Government - and hence the taxpayer - over $1 billion net in that year.

The increasing proportion of patients being treated at fee-charging private hospitals has been little short of dramatic, from 36 per cent to 47 per cent in 2003-04. This is the highest for any state, and effectively saved the Queensland Government nearly $1.9 billion net a year.

Another reason for developing a competitive framework is Queensland’s seriously deteriorating budgetary outlook. The harsh reality is that the government’s capacity to finance expenditure will be much reduced compared with recent years.

But the most serious problem facing the Queensland Government in the period immediately ahead relates to its capacity to finance recurrent expenditures.

Projections to 2008-09 suggest total revenue will increase nominally by only 4 per cent annually - much slower than the projected 7 per cent annual increase in GST and importantly, much slower than the 7 per cent annual revenue growth between1997-98 and 2005-06.

In other words, the government faces the prospect of having to reduce the annual growth in recurrent spending on its services by 3 per cent, mainly because of the much slower projected growth in GST revenue. This is now projected to increase at only about 4 per cent a year rather than the 10.3 per cent a year from 2000-01 to 2005-06, reflecting an expected slower growth in national consumption expenditure and reduction in Queensland’s share of GST revenues.

In practical terms, this means Queensland’s projected total budget revenue of $30.3 billion in 2008-09 is about $2.7 billion less than if the previous GST growth rate had continued, and recurrent expenditure is lower to the same extent.

In short, the GST “bonanza” appears to be over, and unless taxes are to be increased the shortfall in service level can be made up only from increases by the private sector.

Two insufficiently recognised aspects of the Queensland economy also enhance the case for an increased private sector role.