As Australia contemplates the prospect of wall-to-wall Labor Governments, the precedent set by Kevin Rudd and Wayne Swan to raid the Future Fund for infrastructure projects will have interesting implications as various state Labor administrations plunge heavily into debt.

Kevin Rudd and Wayne Goss were very financially responsible when they ran Queensland because they maintained Joh’s legacy of leading the only state with fully funded public sector superannuation through the Queensland Investment Corporation.

However, Queensland is now going into a debt crisis with plans to almost double the state’s gross debt to $46 billion over the next four years to fund an explosion in infrastructure spending, especially on water projects.

The big question now is whether Peter Beattie and Queensland Treasurer Anna Bligh will follow the Federal precedent and start tapping into the QIC’s $50 billion-plus asset pile to fund some of this.

After all, in December last year Frank Lowy’s Westfield group somehow persuaded the QIC to shell out $1.3 billion for a half share in the Merry Hill shopping centre near Birmingham at a miserable yield of just 4.3%. Westfield booked a profit of more than $100 million on the sale after buying the centre only two years earlier.

Should Queensland government super funds really be chasing such lumpy and low yielding assets on the other side of the world when the government is embarking on a $21 billion borrowing binge?

The Beattie Government has even turned to power privatisation to help fund its infrastructure backlog, so raiding the QIC is hardly a major advance on that. The more responsible move would be to sell the estimated $20 billion-plus worth of publicly owned infrastructure assets, which even includes a large chunk of Brisbane Airport.

The Federal Government doesn’t have any financial problems like this, yet the Queenslanders running Federal Labor reckon taping public service for infrastructure is fine. Will a financially straitened re-elected Iemma government do the same? What about the Bracks Government which has also plunged into deficit and will borrow about $10 billion in new money over its third term?

Federal and state governments have about $150 billion set aside for super but the unfunded liability remains above $100 billion. As a nation with an overload of conscripted superannuation assets causing asset bubbles all over the place, it’s a very tricky area for policy makers.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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