If the states were a school class being marked on fiscal discipline and frugal government, Western Australia would lag the cohort with a C-, South Australia and Tasmania would score a C, Queensland do just slightly better with a B-, Victoria with a B+ and only New South Wales would get into the A level (with an A-), the Centre for Independent Studies says.
“Like the Commonwealth, states have piled up a lot more debt since 2007,” says Robert Carling, author of the CIS research paper Report Card on State Finances. “Overall state debt has grown an extra $104 billion to June 2016, or $161 billion if their business enterprises are included.
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“While the Commonwealth’s budget situation receives a great deal of attention, the states deliver many of the public services that people experience in their everyday lives. The condition of states’ finances ultimately determines the sustainability of these services.
“There has been some improvement in recent years, with the states in aggregate returning to a sizeable net operating surplus and their net debt stabilising. However, the aggregates mask major differences among the states.
“New South Wales was clearly in the strongest position in 2016. Looking ahead, even NSW is exposed to the risk of an unexpected decline in property-related tax revenue and the risks associated with implementation of a large infrastructure building program.
“At the other end of the scale, Western Australia exhibited the largest deterioration among the states in the period leading up to 2016 and its finances are now among the weakest of the states — a remarkable turnaround from a few years ago.
“Victoria remains strong, but is showing signs of weakening its grip on expenses, which no state can afford to do.
“Queensland pulled back from the precipice by cutting costs under the previous government and halting the rapid escalation of debt, but has a long way to go to restore the strength of its finances. Meanwhile, the current government is going in the wrong direction by adding thousands to the state payroll.
“South Australia is, as usual, at the weak end of the scale, but has shown signs of improvement in recent years and deserves credit for cutting some state taxes to make the state more attractive for the private investment it badly needs.”
Robert Carling is a Senior Fellow at the Centre for Independent Studies and author of Report Card on State Finances.