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February 11th 2015 print

Tim O'Hare

Palaszczuk’s Pyrrhic Power Play

Queensland's Premier-apparent has saddled herself with a thorny dilemma: If she sells the public assets she swore would never go on the block, she'll break faith with the electorate. If she doesn't sell them, there is no easy way -- perhaps no way at all -- to redeem her state's $80 billion debt

asset saleThe Queensland election is over and Labor has defied the odds, going from a netball team to what is shaping up as a minority government in the making, given the assumed support of independent Peter Wellington. What’s missing is an assessment of what Labor and Premier-apparent Annastacia Palaszczuk will do now that they have defied even their own expectations and won government.

In Palaszczuk’s words, Labor’s strategy was to run “a referendum on asset sales” — an extraordinary single-issue campaign that ran directly counter to the policy her own party advocated at the 2012 election. Working hand-in-glove with its union allies and boosted by a groundswell of grass-roots, anti-privatisation sentiment whipped up by the activist group Not4Sale, the strategy worked.

Palaszczuk’s problem is that it worked too well.

If you don’t follow Queensland politics let me explain, starting with a little background: Both Campbell Newman and his predecessor, Labor’s Anna Bligh,  entered office amid pledges that assets would not be put on the block. In each case a back-flip followed soon after. The incoming Labor government’s problem is that Newman did not finish what he started, as it was in Labor’s interests to let the LNP expend its political capital pushing privatisation while  being quietly aware that it would reap the benefits of the policy it publicly opposed if and when it assumed the government benches.

Had Labor remained in opposition, as even its key strategists privately expected, no problem. Now, however, it has power and the $80 billion debt that goes with it, but no easy way to pay it down.

So far, Labor Treasury spokesman Curtis Pitt has outlined a strategy that is less than modest — a promised $5.4 billion reduction in government debt over five years, to be brought about through small-change measures such as freezing the Newman government’s payroll-tax threshold, project re-prioritisation and cuts in government advertising.  To put those micro-measures in perspective, interest on the state debts is running at around $4 billion per annum.

Pitt described the Newman-era audit that recommended asset sales, authored by former Federal Treasure Peter Costello, as “predictable and purely political” — this despite a similar recommendation in the 2012 Infrastructure Finance and Funding Reform paper by then Federal Labor Infrastructure Minister Anthony Albanese. That report stated:

“State and territory governments should identify and monetise suitable public assets, allowing the freed-up capital and the avoided debt repayments to be invested in new infrastructure.”

On the stump, Pitt insisted the mooted asset sales would deprive Queensland of revenue while punching a $2-billion-a-year hole in the budget. This approach runs contrary to that of Anna Bligh, who vigorously defended her plan to privatise $15 billion in assets:

“There are also many myths being spread and outright scare-mongering that feed those concerns. For example, these businesses are not, as some claim, a cash cow from which government can endlessly draw money. In 2008-09 they generated $320 million, or less than 1% of the Government’s revenue. On the other hand, the Government will save $1.8 billion every year in interest payments on the borrowings needed to sustain them as viable businesses.”

Privatising has long been the third rail of Queensland politics, inspiring a near-hysteria amongst critics as far back as the 1950s. What tapping that vein of opposition has done for Palaszczuk is saddle her with a crisis in the making. If she backtracks on her promise, follows the lead of Bligh and Newman and puts assets up for sale, she will rupture the electorate’s trust. If she doesn’t,  she will be stuck with $37 billion worth of underperforming assets  generating a scant $2 billion-per-annum return.

Annastacia Palaszczuk claimed that keeping assets in public hands was part of her campaign to combat cost-of-living pressures. This flies in the face of reports by both the Productivity Commission and Ernst & Young, each of which found that electricity prices in Queensland have risen 120% since 1998, even as they witnessed declines in Victoria and South Australia, where electricity is privatised. According to another report, this one by  Carbon & Energy Markets, residents of the Sunshine State pay more for electricity than their counterparts in any other state and four times more than Victorians.

In opting for short-term electability, rather than long-term survival, Labor has buried a golden opportunity to ease the state’s budget woes. Now it, along with the voters who put it in power, will have to live with the consequences. Sometimes it just doesn’t pay to get what you wish for.

Tim O’Hare, a keen student of Queensland history and politics, lives in Brisbane and pays far too much for electricity