Has anyone else been surprised by the number of journalists and
commentators who are applauding state governments across the country
for becoming debt junkies once again?

The SMH produced this interesting report about Michael Costa’s belligerent performance with ABC Sydney’s Virginia Trioli yesterday, which concluded as follows:

But there was little incivility with Alan Jones on 2GB. He began by
declaring: “The willingness to get into debt – I don’t have any problem with
that.” It was all friendliness from there.

The Courier-Mail’s Jamie Walker put it as follows:

Running up state debt by $17.2 billion over the next four
years to fund capital works and resuscitate the public health system is
a long overdue use of the state’s strong financial position.

The Courier-Mail’s editorial took a similar line and talked
about the timing in which Queensland “will be entering the financial
markets for funds”, as if to suggest it has no debt at the moment and this will be a new experience.

Truth be known, Queensland currently has record gross public sector borrowings of $25.45 billion, as this page
from its central borrowing authority website, the Queensland Treasury
Corp, reveals. While the media were talking about Queensland’s $2.82
billion surplus in 2005-06, the QTC actually saw its debt blow out by
almost $1 billion in calendar 2005.

Therefore, if you suddenly add $17.2 billion to this debt pile in four
years, our financially strongest state will find itself swimming in
gross debts of $43 billion by 2010. Sure, there are plenty of saleable
government assets if a financial crisis emerges, but the key point that
the Queensland media
have completely missed is that the Sunshine State already has
substantial debt, and substantial tax
rises now loom on the horizon.

It’s all very well to say debt is great, but stacking on more than $4
billion a year – as NSW and Queensland are now both proposing – is utterly
unsustainable and will inevitably lead to either substantial tax rises,
brutal cost cutting or a combination of the two. Would the Queensland
commentariat be equally enthusiastic about big tax rises to fund this
unprecedented infrastructure spending spree?

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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