December 3, 2014

Green shoots that gave hope to Queensland’s economy 12 months ago – in employment growth and lower household debt stress – have not been sustained, with the incumbent, LNP forced to manage a serious malaise with only a promise to entice voters, of improvement in the years ahead.
The government accepts a reduction to its mammoth 64 seat margin is inevitable but any further fiscal deterioration between now and then will see anxiety escalate among individual members – including Premier Campbell Newman himself – who must face off against the increased risk in their own seats.
The stubborn slowdown is evident from the state’s unemployment rate which continued skywards to 6.4% in September, as compared to a national average of 6.1%.

This is the highest rate since 2003 but a closer look reveals the situation to be far worse.
According to the Commonwealth Bank, the Sunshine State’s unemployment rate is “up 26.8 per cent on the ‘normal’ level”.

The “relative underperformance” and fall in employment numbers largely comes from factors outside the government’s control: collapse in coal and commodity prices; decline in mining investment; below-average household spending; high Australian dollar; and persistently depressed consumer sentiment.

Even so, Queensland’s ranking fifth on the bank’s economic performance table – behind everyone except South Australia and Tasmania – will resonate with parochial voters against claims that the LNP is best equipped to steward the state’s economic well-being.

Of particular concern to the party hierarchy, is the pain that comes as a direct result of the government’s own decisions and how that may result in backlash from voters. The cut of around 13,000 public service jobs through terminations, redundancy and natural attrition since 2012 has removed their spending power from the economy (and created an army of vengeful constituents).

Add to that another 1,500 or so each year stripped of future income replacement by workers’ compensation cutbacks, and the spending deficiency in the real economy becomes substantial. Further proof of the pain caused by “soft employment” to households comes from the escalation through 2014 in the consumer financial stress index, caused by high household debt and costs of living impacts.

The running dead on many government programs have also applied a negative multiplier on the revenue side of an unknown number of traders, making current trading conditions the worst for more than a decade for the majority of small businesses.

The strategy back in 2012 – when the razor was put through the public service – was to get it done quickly so it would be forgotten by the time the next election rolled around by which time economic conditions would hopefully have improved.

The facts show economic conditions still haven’t improved and tangible evidence of the much-vaunted turnaround is unlikely to materialise before the poll that must occur by June 2015 at the latest. The new LNP tactic is to run to the election with a case of a “still sick economy” and “soft employment” with a plea that the LNP is best equipped to manage the conditions with the questionable “strong choices” strategy.

Treasurer Nicholls will also point to the pending bonanza beginning in the 2016 and 2017 fiscal years when – barring oil prices remaining depressed – LNG exports show some signs of finally producing revenue.

We have heard this spectacular optimism before. Former treasurer Andrew Fraser said the very same thing before the 2012 election. The northern state would be in windfall territory; he claimed by 2013, also on the back of LNG exports and would lock in future annual growth of at least 5%.

The electorate is entitled to be circumspect about an assurance that boom conditions are just around the corner when the identical prophecy did not eventuate three years ago and most voters have never laid eyes on an LNG well or pipe.

Chortling that there will be a cash splash in a year or two’s time also begs questions of the need for austerity in the first place and why that path was followed if it was known to be likely to contribute to a stubborn and hurtful downturn in the meantime.

Why, voters may ask, do we even need asset sales (or leases) that will lead to more job losses, “next year we will be leading the nation,” as Nicholls wants us to believe. And why if we are about to enter a period of enormous growth, was it essential to slash workers’ compensation for 1500 workers every year and to let go 13,000 public servants?

Attempting to justify austerity carries the further risk of tarring the Newman government with Abbott’s brush. It will be a hard sell for Newman et al to differentiate their brand of cost-cutting, to those of the feds with their cuts to pensions, medical consultation co-payments, higher university fees and federal program wind-backs.

Nicholls’ predictions of a rosy future after 2016 are well-credentialed.

Improvement in the states agricultural export market, tourism growth, low-interest rates and the Australian dollar normalising at 80c or lower, as well as LNG of course, will all help spur growth and fill the Treasury with tax booty.

The question remains of whether a historically unpopular government can sell these positives when the feel on the street and at tills around the state, remains palpably negative. An October poll of 1471 respondents showed on a two-party preferred basis, the LNP maintaining a lead of 51-49. So it remains in an election-winning position by around 20 seats.

That means 20 or so LNP members will need to find a new job.

In Campbell Newman’s own seat of Ashgrove, the poll puts the vote split at 56-44 in favour of former Labor minister Kate Jones who Newman defeated in 2012. Most telling though – in numbers that will have the entire party worried should they reflect sentiment statewide – Jones out polls Newman in the personal popularity stakes, 58% to 34% with Newman having a disapproval rating of 53%.

Queensland has been also left at the starter’s block in the residential property boom being enjoyed in southern capitals and is bringing in stamp duty receipts reminiscent of pre-GFC days. Duty inflows to NSW state coffers will likely see Mike Baird’s coalition government returned against all odds.

Brisbane is having its own mini apartment boom but because sales are mostly off-the-plan – with stamp duty not due for payment in most cases until settlement in the latter part of 2015 – Baird’s good fortune doesn’t relate here.

Categories: Opinonian

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