Last-minute economic policy post

November 24, 2017
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Last-minute economic policy post

Both Labor and the LNP have released their economic policies just two days before the state election. This isn’t just a matter of “costings”. Essentially, all the new expenditure items and tax reductions were announced with some fanfare during the campaign, while the revenue measures and expenditure cuts needed to fund these goodies have been kept under wraps until now. This is a terrible way to run an election, but the “hardheads” on both sides obviously think it’s a good idea (the same hardheads who gave us compulsory preferential voting on the Labor side and the Commission of Audit for the LNP).

On the LNP side, my assessments here and here have been confirmed. The tax cuts and extra spending promised by the LNP have been financed by cuts to services (euphemistically referred to as “efficiency dividends”) and by the abandonment of the Cross-River rail project, which appears to be vital if we are going to handle a growing Brisbane population in the future. The efficiency dividend will necessarily involve reduced employment. If the promise to avoid compulsory redundancies is adhered to in spirit as well as letter, that will mean a semi-permanent hiring freeze in areas with low turnover, which is likely to have adverse effects on efficiency.

These are big cuts, but not enough to reach the target of a surplus on fiscal balance. That means the stage is set for yet another Commission of Audit and unannounced further cuts.

Labor is planning to finance promised improvements in services through a mixture of tax increases (targeted at the relatively wealthy) and unspecified reallocation of existing funds, yielding a modest net increase in expenditure as compared to the cuts proposed by the LNP.

We have a choice then between Labor offering improved services, which must ultimately be financed by tax revenue and the LNP offering cuts in taxes, services and jobs. It would have been helpful if this choice had been made explicit four weeks ago, but still it is clear enough. Unsurprisingly, I prefer Labor.

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