Thursday 7 June 2012

LNP inherits 'unsustainable' fiscal position from Labor

According to the new LNP Queensland government, the true extent of the financial mess left behind by Labor is growing clearer by the day, Queensland Treasurer Tim Nicholls says.

Mr Nicholls today revealed the Queensland Treasury Corporation had advised him the state's level of debt was unsustainable and must be urgently addressed.  He said Labor's debt binge, expected to blow out to $85 billion by 2014/15, was putting further pressure on the state's credit rating.

In Question time today, Nicholls quoted the following advice from QTC:

  • "Feedback from QTC's recent financial markets interactions indicates that market participants consider the State's fiscal position to be unsustainable and are looking for the Government to deliver a credible strategy to address the State's level of debt and ongoing budget deficits as a matter of priority. Prompt action to develop, implement and communicate such a strategy is essential to support QTC's ongoing ability to access funds. 
    The State's debt has reached unprecedented levels. Together with its published forward estimates showing an even greater volume of debt will be required, Queensland is now in 'uncharted waters' with respect to the volume of debt on issue and the resultant interest bill. 

    It is not simply the fact that Queensland is rated AA+ relative to the AAA rating of Australia's other mainland states that concerns the market. In light of the current economic and market environment, it is also the State's: 
    • significantly higher current levels of debt • significantly higher forecast borrowings, and • need for a clear strategy to address the deficit and debt levels." 

Mr Nicholls said the former Labor Government spent well beyond its means and had no clear plan to rein in spending. This was evidenced by the fact Queensland's current net financial liabilities compared to operating revenue is forecast to reach 123 % by June 2013.

"Ratings agency Standar d and Poor's advise that the appropriate range for the State to return to a AAA rating is in the order of 100 to 80 per cent."

"The main reason the previous Labor government lost the AAA credit rating was due to the fact they had no plan. No plan to repay the debt; no plan to stop spending and no plan to stop borrowing at record rates from ever dwindling markets," Mr Nicholls said.   "A table from the Moody's rating agency demonstrates that if nothing changes, we are headed for a credit downgrade - again. The cost for the first downgrade was $750 million and it continues to grow as the level of debt rises.

Mr Nicholls said he was looking forward to receiving the independent Commission of Audit's interim report next week, but was mindful it could contain further shocks.

"If the Commission delivers a report that uncovers more horrors, the Newman-led government is up to the challenge of tackling the legacy left behind by the previous Labor government."


KitchenSlut said...

So ..... why has the Qld Guvmint bond market hit multi-year record level low rates with investors keen to throw all they can at us at ever lower rates if that is unsustainable?

k.nevill said...

Kitchenslut raises a good point. The independant commission that the one led by a former lnp treasurer by the name of peter costello. no need to say anymore. Mike i used to regularly follow your blog but you are now just another version of cairns post echoing the biased, one sided crap that now has cairns being represented by a pair of buffoons and grandad manning. Bye,bye.

KitchenSlut said...

I appreciate your words k.nevill however my intent was not to attack Mike. I was only doing what I always do in my own woonkish way.

Regardless of what you think of Cairnsblog it is unlikely many other blogs in Cairns would be here now without it? Personally, I am also thankful for the role of Cairnsblog in helping get rid of Alan Blake as my CBD councillor.

I do stand fully behind the particular issue I raised and believe Mike has become somewhat unhinged here along with broad community delusions. Perhaps he has been diverted by taxi driver Bryain Law who has referred to Qld as "broke". Last time I looked a nudge down to the second highest dredit rating was not "broke". If I was getting into a taxi with Bryan I would make sure the meter was running and not trust his own numbers!

I can make many criticisms of the previous Qld Guvmint which was past its us-by date. It wasn't me who vorted for them in previous elections. However, that is not the same as promotiong a mad ideological delusion on the debt position!

The audit commission report is imminent and the only thing I am sure of is that the volume of words will not be matched by action in the financial markets for Qld debt.

Please also note that I respect audit commissioner Peter Costello as a politician who I have also met while working for the LNP during the 2007 election. However, i don't believe he is an appropriate choice as an auditor for the role.