Bligh's bounty

For the first time in some time, Queensland plans to borrow $10 billion over the next four years to help provide much needed infrastructure. A good thing, too.

The State Budget is no different to a set of financial accounts for a commercial enterprise. It should indicate long-term fiscal wellbeing, highlight core priorities, as well as revealing the effectiveness of key management decisions made by CEO Beattie and CFO Bligh.

Yesterday was the annual general meeting of Sunshine State Pty Ltd. As shareholders, we should be asking a whole lot of questions, including why Queensland has so little debt.

Business 101 tells us successful companies use long-term borrowings to finance a proportion of their productive asset base. Debt is cheaper than hard-earned equity - the taxes coughed up by shareholders.

Would you rather see a city tunnel or urban rail link built with your taxes or a combination of tax revenue, user-pays and debt? These assets are going to be around for 50 years or more. It’s therefore reasonable future shareholders pay a little interest down the track instead of us digging deeper into our pockets.

In previous decades, state governments carried debt because they had no choice. Rather than capitalise on recent good times, most of them have neglected infrastructure basics and now require debt to support the catch-up.

The dramas in transport, water and electricity have reminded politicians of the need to consider the longer-term in more detail. To look a lot harder at where to spend budget funds and whether to pay for it now through existing revenues, later via borrowings or bring in the private sector to lessen the financial burden.

As Anna Bligh points out, there is also the matter of actually delivering on the promises. While there are undoubted skills shortages, the biggest constraint on making commitments a reality is the capability of those working for the Sunshine State.

The re-emergence of debt on the Queensland’s balance sheet and the difficulties with infrastructure mark an opportune time to instill a more corporate philosophy deep into the workings of government.

Having government adopt commercial practices doesn’t mean it has to become fixated on the dollars or surrender non-financial measure of success. Nor does it mean we should resurrect the white shoe brigade or Queensland Inc.

While every other area of the economy has had to cope with the harsh demands of micro-economic reform, the culture and skill set of governments have essentially remained in a time warp.

If the Queensland Government was listed on the stock exchange tomorrow it would be taken over, restructured and transformed into something more efficient and responsive.

The structure of the public service business units is out-dated, riddled with duplication and conflicting roles. Queensland Transport, for example, has such diverse functions as renewing car registrations, appointing lolly-pop ladies, managing boat harbours and overseeing billion-dollar transport construction projects.

Under a truly corporate model, Sunshine State would likely have a department of infrastructure that considered transport, energy and water in a holistic fashion.

Another relevant business issue involves the question of core activities.

All profitable companies ask themselves what it is they do and don’t do. Qantas doesn’t suddenly venture into oyster farming - it knows others do it better. A business must be honest about its strengths and weaknesses. If not, it will over-reach and not perform where it needs to.

As funds become tighter, our Sunshine State senior executives will need to be increasingly frank about core business.

The bungled Snowy Hydro sale is an example of what not to do. New South Wales needed funds for infrastructure. But rather than openly address the pros and cons of privatisation, and demonstrate the trade-offs, the NSW Premier tried to pull a swifty and was brought undone.

As with the recently announced sale of electricity retailing, Queensland must be more diligent and clinical in asking the tough questions about public ownership. Is it really in our interests to own electricity generation companies, freight railways, container ports and a publishing business? A good CEO and their team explore these issues on behalf of the shareholders.

Governments need to be more proactive and business-like in managing our financial situation. Queensland taking on debt seems more reactive than strategic.

The Premier and Treasurer should be asking what else needs to be done. What is core business, how is government best structured and do we have the internal capability to deliver upon the commitments.

Such questions are front of mind in the commercial world. And they’re just as relevant for government.