More Work to be Done in Sunshine State

Australian Financial Review

23rd August 2006

Peter Beattie hasn't even started on reform, argues Des Moore.

(Square bracket sentences deleted from published version)

Queensland Premier Peter Beattie gave enthusiastic support for reform at the recent meeting of the Council of Australian Governments. He backed an agenda for improving the efficiency of state services and a new Council to assess reform proposals potentially eligible for Commonwealth assistance.

But in the campaign for the Queensland election on September 9, the parties have ignored substantive reform proposals in favour of proposing new expenditure or making "we can do it better than you" assertions. [The media's tiresome focus on personalities rather than policies has not helped]. It is particularly surprising that the coalition parties have yet to indicate policies that could create the more competitive framework needed for the provision of services and the economy generally.

Despite its relatively faster growth, Queensland remains a poor fourth in per capita incomes and reforms are needed to improve productivity, which is well below that in most states. The private sector accounts for 80 per cent of the economy and policies to enhance its role would make an important contribution, both socially and economically.

The continued poor performance of the relatively centralised Queensland government services [since the Beattie Government was first elected in 1998] is reflected in their decreased usage and relatively low returns earned on public corporation assets.

For example, despite increases in pupil/teacher ratios, and continued lifts in non-government school fees, the proportion of government school students has dropped from 72 to below 70 per cent. Attendance at non-government schools now saves Queensland taxpayers about $1 billion net a year in expenditure [on the generally lower quality education at government schools].

More strikingly, the proportion of patients treated at public hospitals has dropped from 64 per cent to 53 per cent, so that nearly half of all Queensland hospital patients are now paying for their treatment at private hospitals. [This is easily the highest in Australia and, contrary to popular perceptions, Queensland's overall provision of hospital beds per capita is as high or higher than in most states despite the Beattie government's reduction of twelve public hospitals].

Private hospitals are taking over the role of their public counterparts - and generally performing better than them, according to an independent report last year. Competition works - particular attention is given to monitoring standards to minimise the risk of Dr Death type incidents in public hospitals. Savings to the Queensland taxpayer from private hospital usage amount to nearly $2 billion net per annum.

These two government services, accounting for about half of Queensland budget expenditure, are wide open for reforms. Political parties should take advantage of the increasing public recognition of the higher quality private sector alternatives. Policy options would include official encouragement and assistance for the further expansion of private school and hospital services and an increased contracting out of parts of such services and operational responsibilities in the government sector.

There is also a strong case for increasing the infrastructure role of the private sector. Queensland's public investment spending - including by public corporations - has been the highest, relatively, amongst the states. But Beattie's so-called plan for additional infrastructure spending of $55 billion over 20 years is meaningless - additional to what? [Moreover, a "high" level of public investment is not the most productive approach, as illustrated by Productivity Commission reports showing the poor financial performance of public corporations].

There is a strong case for selling most of the state's $22 billion of corporate assets - particularly in the electricity, ports, and forestry sectors - and franchising the operation of most rail transport. Although the existing 20 public corporations contribute dividends to the budget, their sale should yield a net recurrent saving and provide funding for relevant public infrastructure.

The Beattie Government has maintained Queensland's position as the state with the least severe taxes. But my May on the role of government in Queensland provided a framework for reducing state taxation by a further $1 billion to $1.5 billion per annum. Think how attractive Queensland would be [to investors, not to mention families and individuals,] with taxes about 30 per cent below the states' average. If it adopted a new, "attract private sector" approach to governing the state, such a tax reduction could be achieved by reducing expenditure by 4 to 5 per cent.

That would make the next Queensland Government a leader amongst the states, improve the economic and social positions of the wider Queensland community and close the per head income gap more quickly.

Des Moore is Director, Institute for Private Enterprise, and author of The Role of Government in Queensland, Commerce Queensland, May 2006