Treasurer and Minister for Trade
The Honourable Tim Nicholls
LNP inherits ‘unsustainable’ fiscal position from Labor
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 (QTC) 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 Mr 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 d ebt 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.
“The Newman Government has a strong economic plan based on building a four pillar economy.”
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.”