Miles Government cost-of-living relief measures are fuelling inflation and forcing Queenslanders to endure higher interest rates for longer, according to a new economic analysis of the state’s finances by Brisbane-based consultancy Adept Economics.

Download the full report here.

Adept Economics director Gene Tunny finds Queensland’s budget spending is out of control with the state borrowing money for recurrent spending like public service wages.

The Adept Economics report showed that Queensland budget spending was on an unsustainable path and that the Miles Government had been cooking the state’s books through a series of dodgy accounting tricks.

Reckless spending is saddling the next generation of Queenslanders with an unsustainable debt burden and interest payments which mean there is less money to fund the things people really need like schools, hospitals and police.

Whichever party won the election would have to take hard decisions to tackle the state budget mess.

The report, commissioned by the Australian Institute for Progress, warns that within four years one in every 20 dollars raised by the Queensland will be spent on interest repayments and suggests that the government’s financial position is worse than the figures outlined in the latest budget papers.

Download the full report here.

The report finds discretionary policy measures of $4.6 billion in 2024-25 on cost-of-living relief such as electricity rebates and 50c public transport fares, amounts to nearly 1% of Gross State Product which is pushing up demand at a time when the economy does not have the capacity to absorb it.

The report finds the Queensland Government has contributed to inflation in two ways:

1. Excessive cost-of-living subsidies have relaxed household budget constraints and contributed to aggregate demand for private sector goods and services at a time when the Reserve Bank of Australia is trying to reduce aggregate demand with a view to bringing inflation back to the target band of 2-3%.

2. Its excessive capital expenditure program is contributing to rising construction costs as well as overall higher aggregate demand.

The Adept Economics report warns the government is breaching its own fiscal guidelines with the size of the public service rising by 4.8% in the last 12 months alone compared with a population increase of 2.5%.

In terms of the 2015 principles, it has failed to reduce the debt to revenue ratio and failed to target net operating surpluses that ensure any new capital investment in the General Government Sector is funded primarily through recurrent revenues rather than borrowing.

In terms of new fiscal principles introduced in 2021-22, the government is arguably failing to stabilize General Government Sector net debt in the medium term given the net debt to revenue ratio is surging and failing to primarily fund capital spending from net operating cash flows.

It finds there is $3 billion in unexplained expenditure in government financial accounts meaning the state government did not run an operating surplus of $564 billion in 2023-24, and the fiscal deficit was $8-9 billion compared with the estimated $5.7 billion deficit published in the 2024-25 budget.

Adept Economics says Queensland Government budget spending is on an “undesirable trajectory’’ with net debt per Queenslander expected to be 481% higher in 2028 than when the government took office at $9150 per Queenslander, compared with $1575 per Queenslander (in 2024-dollar terms) in 2015.

This is expected to be higher given the $10 billion in new government commitments since the June budget.

Adept Economics says interest expenses will account for 3% of state government revenue in 2024-25 rising to 5% in 2027-28.

“To further illustrate the implications of this higher interest bill, consider that the $2.7 billion the Queensland Government will pay in interest out of the budget in 2024-25 exceeds the $2 billion it is expected to receive in motor vehicle registration fees or the $2.5 billion it receives in land tax,’’ the report says.

The report says the privatisation of the Titles Registry is a “fake’’ which has given the government political cover to borrow an extra $2.1 billion “off-budget’’.

The report says the privatisation is a “fake’’ because its $8 billion dubiously capitalises the value of a general government taxation power that could not possibly be sold in the modern world.

It also finds the government transferred more than $3.1 billion in debt from its books to the energy businesses, Energex, Ergon, and Powerlink which allowed the general government sector to pay back some of its debt owed to QTC. But this forced the energy business to borrow money from the QTC.