Treasurer warns: sell off assets or miss rail project
UNLESS Queensland slashes its $80 billion debt, the rail line from Brisbane to Nambour won't be duplicated "for 25 years".
Queensland Treasurer Tim Nicholls delivered this and other sober warnings as he met with a group of Sunshine Coast business, community and government leaders to discuss the state of Queensland's debt yesterday.
The two-hour workshop, held at Lake Kawana Community Centre, wasn't all doom and gloom.
Indeed, the Treasurer was able to boast of a state economy that was twice as strong as the Australian average.
But Mr Nicholls has set his sights on the state's $80 billion debt - and the need to cut this figure by at least $25 billion, if the state is to win back its triple-A credit rating.
To sell the need to sell state-owned assets, Mr Nicholls has embarked on a tour of key Queensland cities, meeting with community and business leaders.
"The one thing that holds us back from being able to achieve what we believe is Queensland's full potential is the level of debt that the state holds," Mr Nicholls told the meeting.
"That is projected to reach $80 billion in 2014-2015. That's $15,000 for every Queenslander, twice the average of the rest of the country.
"It's been a very steep increase in debt. In recent years, previous governments have failed to balance their budgets and have had to make up the difference by borrowing.
"We're losing the capacity to fund new infrastructure so, if for example, we wanted to talk about the (Brisbane to Nambour) rail upgrade, it'll be on the list but it's not going to get funded.
"Duplication of the rail line at Nambour is not going to happen for 25 years ... if we don't get a solution to this."
Mr Nicholls said the government had been advised to urgently pay pack at least $25 billion debt or risk being unable to fund any more infrastructure.
"We have to reduce our debt by $25 billion. We've got to go from 80 to 55. That'll get our triple-A credit rating back and give you sufficient credit to be able to borrow to fund infrastructure in the future," the Treasurer said.
"That's the number that the commissioner of the audit said will enable you to borrow again without imperilling your credit rating and will free up sufficient funds to enable you to continue to invest in the state."
Mr Nicholls said the government had identified several state-owned assets that if sold, would enable it to pay back the magic $25 billion.
"We've identified a number of businesses that could potentially be sold and we said they were the ports of Townsville and Gladstone, and we might also include the Mount Isa to Townsville railway line," he said.
"Two coal-fired power generators - CS Energy and Stanwell - and the industrial assets of Sunwater. They are pipelines that service the gas fields, the coal mines; the agriculture sector will get theirs back as a separate, locally-managed scheme.
"In terms of the big power distributors, Powerlink, Ergon and Energex, we would look at alternative ways of getting private finance into them while still maintaining majority ownership position.
"To give you an example, CS Energy, a flat coal-fired power station-owning company,... has not made a profit since 2008. And three years ago it required a $300 million capital injection from the government, ie, taxpayers, simply to keep it solvent.
"So it's selling electricity into a national market, over which we have no control, at the same price it was selling electricity 10 years ago.
"In the same period, its salary costs have gone up by better than 4% a year, until this year, when they went up by 2.5%.
"So you have to say, is that an asset the people of Queensland are better off owning, or is that an asset that the people of Queensland are better off selling - if we can sell it?
"We haven't made a decision about whether we will do that but it needs to be considered because it is, on the face of it, the right solution for the problem we have."
Mr Nicholls said the Government was also contemplating savings that could be achieved by selling Queensland's regional rail network.
"Currently, we're in discussions with Australian Rail Track Corporation about our regional rail network and the opportunities around the Australian Rail Track Corporation taking over the ownership of that from Queensland Rail so we become effectively the runner of trains. We run the trains on the track, we're not the owner and maintainer of the tracks," he said.
"That's something that we wouldn't be selling, that's something we would pay to give away because we would avoid the ongoing cost of maintenance and upgrading, and they have more funds to do it."
While the subject of yesterday's two-hour gathering at Lake Community Centre was paying down a sky-rocketing state debt, the meeting was hardly all doom and gloom.
Meeting participants, which included Mayors Mark Jamieson and Noel Playford, were told that the latest economic figures show a state well on its way to recovery from the lows of the 2008 GFC.
"Growth is going really well. In the year to September 2013, Queensland's gross state product grew by 4.1% and that's double the rate of the rest of Australia," Mr Nicholls said.
"We anticipate that this growth will go up to 6% in 2014/2015 so we're on an upward trajectory. That 6% will be on the back of gas exports, predominantly.
"We're certainly seeing a return to the construction industry, with housing approvals and other approvals starting to come through ... but there's still a bit of a way to go to see construction start on these approved projects.
"There is reason to be optimistic around tourism. The Gold Coast have had their best year in almost a decade.
"Certainly the absence of storms, cyclones and other natural disasters has certainly had something to do with that but also the work the government has put into building that pillar of the economy.
"Resources continue to be strong. But resources in terms of investment are tapering off.
"The massive investment that has gone into the gas fields and the gas-processing plants in Gladstone will naturally come off.
"You can't keep building at that rate. So we'll go from a construction phase to an export phase. And that will continue to drive strong economic growth.
"And agriculture, despite the current drought over much of Queensland, is showing strong growth as well, particularly in terms of exports into markets like China and Asia where are products are seen as a very desirable clean and green product."
Mr Nicholls said no decisions had been made on asset sales and the current meetings with community leaders was just the first step in a long process of public consultation and exploration of solutions to Queensland's debt.
"This is the first of many discussions we want to have with Queenslanders about the state of the economy," he said.
""We'll be producing a draft plan and I'll be releasing that at the budget, saying 'Here is what the government believes is the appropriate way forward.'"
UP FOR SALE?
Assets the Queensland Government is considering selling to pay down its debt:
- Townsville and Gladstone ports
- Mount Isa to Townsville railway line
- CS Energy and Stanwell coal-fired power generators
- Sunwater's industrial assets