Two years ago Queensland voters changed their government in the most emphatic terms imaginable, partly because the ousted government had left the state’s finances in a mess. Yet within months public opinion was turning against the Newman government for its cost-cutting zeal, and especially its public sector job cuts, which were part of the response to the mess.
Since then, the issue of job security has become more salient, and not only in Queensland. A national poll this week suggested that while a majority of voters say getting back to budget surplus is a priority, 86% say generating jobs is a higher priority.
These issues will doubt play on the minds of the new governments of South Australia and Tasmania, and for that matter all the other state governments. The analysis of state finances in the new CIS report, ‘States of Debt’, argues that in cutting back operating costs, the Newman government is on the right track and other states, to varying degrees, need to do the same.
One of the most startling features of state finances since the global financial crisis has been the disappearance of operating surpluses. Combined with a ramp-up in capital (infrastructure) spending, this has put most state budgets into uncomfortably large cash deficits, and debt has accumulated at a rate that should not be allowed to continue. One of the solutions is to restore operating budgets to surplus. This is necessary if states are to be able to pay for infrastructure without piling up too much debt.
Restoring operating surpluses requires tightening up on operating costs. Because state government operations are labour-intensive (think of schools, hospitals and policing) their costs are dominated by payroll. Curbing operating costs has to involve cutting government jobs and clamping down on public sector pay. This is what the Newman government is doing.
Voters are entitled to demand fiscal discipline in the abstract while disliking specific actions governments take to impose it. But at some point they need to recognise that state governments don’t exist to provide jobs regardless of the need for them or taxpayers’ willingness to finance them. Balancing budgets and achieving employment growth should not be thought of as either/or propositions. Steering the public finances onto a sustainable path will assist employment growth.
Robert Carling is a Senior Fellow at The Centre for Independent Studies and author of States of Debt.
Home > Commentary > Opinion > State governments in a jobs quandary
State governments in a jobs quandary
Since then, the issue of job security has become more salient, and not only in Queensland. A national poll this week suggested that while a majority of voters say getting back to budget surplus is a priority, 86% say generating jobs is a higher priority.
These issues will doubt play on the minds of the new governments of South Australia and Tasmania, and for that matter all the other state governments. The analysis of state finances in the new CIS report, ‘States of Debt’, argues that in cutting back operating costs, the Newman government is on the right track and other states, to varying degrees, need to do the same.
One of the most startling features of state finances since the global financial crisis has been the disappearance of operating surpluses. Combined with a ramp-up in capital (infrastructure) spending, this has put most state budgets into uncomfortably large cash deficits, and debt has accumulated at a rate that should not be allowed to continue. One of the solutions is to restore operating budgets to surplus. This is necessary if states are to be able to pay for infrastructure without piling up too much debt.
Restoring operating surpluses requires tightening up on operating costs. Because state government operations are labour-intensive (think of schools, hospitals and policing) their costs are dominated by payroll. Curbing operating costs has to involve cutting government jobs and clamping down on public sector pay. This is what the Newman government is doing.
Voters are entitled to demand fiscal discipline in the abstract while disliking specific actions governments take to impose it. But at some point they need to recognise that state governments don’t exist to provide jobs regardless of the need for them or taxpayers’ willingness to finance them. Balancing budgets and achieving employment growth should not be thought of as either/or propositions. Steering the public finances onto a sustainable path will assist employment growth.
Robert Carling is a Senior Fellow at The Centre for Independent Studies and author of States of Debt.
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