Privatising the Sunshine State

First, although the private sector’s contribution to the state’s total final demand has become progressively larger since the early 1990s, other states have also experienced an increase.

Second, despite Queensland’s much-vaunted faster rate of economic growth than any other state in recent years, it is starting well behind scratch in the per head growth stakes. In 2004-05 it was running fourth in those stakes with a per head income 10 per cent lower than the Australian average, and about 12 per cent lower than in NSW and Victoria.

In the seven years of the present government, Queensland has just managed to pass South Australia on the home turn, and is still a good distance behind the heavyweights as the horses move down the straight.

The government would be better advised if it recognised the need for more general policies that create an economic environment that is receptive to the private sector. A major program of reduced business regulation would be both helpful and have the potential to lead the states.

Although there is no proven direct relationship between changes in economic growth and the size of the public sector, it seems almost indisputable Queensland would have performed better if it had done more to encourage the sector that is driving growth and employment.

The contrast between NSW’s and Victoria’s experiences over the past seven years may have some relevance to Queensland. While those states’ private sectors did not increase their relative contributions to state final demand over this period, Victoria started with the advantage of already having a larger contribution from that sector.

Victoria has also been more receptive than NSW to private sector participation in government services, so it is not altogether surprising that its per head income increased relative to the Australian average, while NSW’s fell. From being well out in front, NSW is now struggling to keep its head in front of Victoria.

If the Queensland Government were now to take the lead among the states by announcing that it will positively and comprehensively seek and encourage private sector involvement across the whole range of government services, and in the economy more generally, such a policy would have considerable potential for improving the wider Queensland community’s economic and social positions, and for closing the remaining per head income gap.

My proposal is for a program to reduce state taxation by between one-fifth and one-seventh - by $1,000 -1,500 million a year. This is not because Queensland has a big-spending government: it does not. But in a budget of $27 billion it would undoubtedly be able to find savings of $1 billion - about 4 per cent of total expenditure - if the government can adjust its priorities.

The government may feel unable politically to handle the outcry from those who would lose from reductions. But what if it decided to reduce spending specifically to finance major tax cuts as part of a new and innovative approach to governing the state?

In short, if the government has the capacity and inclination to effect a major change in its priorities that would benefit the Queensland community, it should be able to handle the reduced-spending complainers with minimal electoral harm.

This proposal would be presented as part of a comprehensive change in priorities to make Queensland renowned for being the most attractive state to private investors. Instead of having taxes only about 14 per cent below the average for the states, Queensland would have them about 30 per cent below.