Sales, deficits and job cuts

What do you do when the recession takes a bite out of your budget but you still need money to provide essential services? Three Australian states have found three different solutions to this problem.
In Queensland, state premier Anna Bligh announced plans to sell five key infrastructure assets as a way to plug an A$14 billion (€8 billion; $11 billion) budget shortfall over the next four years, compliments of the global financial crisis.

The assets for sale include Queensland Motorways, the Port of Brisbane’s shipping terminal, timber producer Forestry Plantations Queensland, Queensland Rail’s coal haulage and non-passenger businesses and the Abbott Point Coal Terminal.

The sales are expected to take place over the next three to five years and raise A$15 billion – money which will be used to avoid A$12 billion in capital expenditures over the next five years, and to provide funding for other projects. This could include the A$3.5 billion investment programme in the state’s transport infrastructure announced in the latest budget.

For Queensland, the asset sales may be the only option left. The state has already raised taxes – 2009 marks the first year that land tax receipts surpassed A$1 billion, thanks to a surcharge announced late last year – and Bligh has to make good on a promise to resist service cuts, which she made during a campaign earlier this year.

But Queensland is also in far worse shape than many other states. GDP for the quarter ending March 2009 fell 1.4 percent, compared to a decline of 0.3 percent for Australia as a whole. Only the Northern Territory, at negative 2.2 percent, fared worse.

In New South Wales, Queensland’s neighbour to the south, GDP fell by only .1 percent. But rather than selling assets, the state will instead fund its infrastructure spending programme – a record A$62.9 billion over the next four years – with a “moderate budget deficit”, state premier Nathan Rees has said. Rees reasons that the deficit is a necessary trade-off to protect what he called “essential frontline services” that include water and sewage, energy and commuter rail operations.

Meanwhile, Tasmania – Australia’s island state to the south of Victoria with a negative .5 percent of GDP growth – made plans for a A$3.9 billion infrastructure spending plan over the next four years. But there’s also something else in the 2009-2010 budget: severe cost-cutting, including wage freezes and about 800 layoffs in the public sector.

As in Queensland and New South Wales, though, infrastructure provisions remain paramount. “Front-line services”, including health, education and policing, will be quarantined from cost-cutting, Tasmania has said.

So whether selling assets, running deficits or cutting jobs, Australia’s state governments are keen as ever to keep their infrastructure programmes running in what is increasingly looking like a thin year for their coffers.