The Bligh budget blowout

A report released by the Institute of Public Affairs on state government finances is a wake-up call to Queenslanders about our state's mismanaged finances and poor delivery of services.

While the total budget deficits for all states this financial year is forecast to be $2.9 billion, we should take notice that $1.9 billion - or 65 per cent of this combined deficit - is Queensland's.

While most of the other states are expected to be in surplus by 2011-12, Queensland, along with Western Australia and the ACT, will not emerge from deficit until much later.

Two issues need to be considered.

First, how could a growth state such as Queensland, that has benefited so much from the resources boom under the Peter Beattie and Anna Bligh regimes, be in such a financial mess? Is it just the global financial crisis, as the Bligh Government contests, or are there more home-grown factors at work?

Second, why is Queensland going to take so long to return to a Budget surplus?

The Bligh Government has too easily blamed the global financial crisis for why Queensland's once-robust finances are now in such a mess.

Certainly the crisis affected the resources sector but not as much as was expected, as shown by the latest figures pointing to China's continued growth. Recent assessments from Prime Minister Kevin Rudd also suggest the impact of the financial crisis on Australia has been less than elsewhere.

The underlying cause of Queensland's financial crisis has not just been the global world economic situation, though an important contributing cause.

Rather, the real culprit has been the excessive growth of the public service caused by weak supervision and poor policy settings by successive Queensland governments during the past decade.

Between 2000 and 2008, while other state public services grew at a faster rate, the actual number of new public servants in Queensland increased by 45,000 - just behind the much larger states of New South Wales with 54,000 and Victoria, 60,000. The real problem was that during the 1990s, when other states were introducing reforms such as privatisation which reduced public service numbers, Queensland rejected such changes.

Consequently, Queensland was the only state during this period in which public servant numbers increased.

So, in the good times Queensland never laid down the basis for a smaller and less costly public service.

Queensland is only coming to these reforms now - too little and too late.

Making these matters worse is that since 2000, Queensland public servants have had the strongest growth in gross earnings per state public sector employee of any state. Earnings rose from $39,000 in 2000 to about $53,300 (an average 5 per cent a year), compared with Tasmania (4.7 per cent), New South Wales (4.2 per cent), Western Australia (4 per cent) and the ACT (3.8 per cent).

Furthermore, in 2008-09, Queensland had the second-highest costs in terms of benefits and perks to public servants, just behind NSW and ahead of Victoria and the rest of Australia.

Importantly, Queensland public servants have been earning more than their private sector counterparts. This has contributed to the skills shortage in the private sector, which is a particular problem in a growth state like Queensland. Why work harder in the private sector when better conditions exist in the state bureaucracy?

Some argue that increases in Queensland public servant numbers were needed to deliver services in education, health and public safety given Queensland's growing population. This is a valid view but sadly many of these additional public servants do administration rather than deliver services to citizens.

In Queensland's public hospitals there has been a growing proportion of personnel in managerial and administrative positions relative to medical staff.

An increasing proportion of non-operational staff has also been seen in the police services. Studies show that extra resources in education, mainly in the form of more teachers, have not resulted in better-quality education.

Fixing Queensland's financial crisis is going to take longer than the other states because this expanded public sector makes it harder to initiate change quickly.

The Bligh Government's close relationships with trade unions constrain necessary corrective policy actions, attempts at staff redundancies and resistance to public sector unions' wage demands.

Cutting government functions is also difficult given Labor's predisposition to intervention and the demands of its key constituencies.

With more bad news expected in relation to commodities and our tourism sector and with a continuing population boom requiring more infrastructure, Queensland needs more stringent policies sooner rather than later. Can the Bligh Government deliver?