15 July 2010

Professor at UQ's School of Economics, John Quiggin, has called for an election to restart the debate over the sale of the State government's coal assets.

Speaking at a debate organised by the School of Economics on Wednesday, Professor John Quiggin also highlighted the poorly constructed business case for the sale of QR National and questioned the strength of the facts presented in the Bligh government's argument.

The case for the sale was presented by Dr Doug McTaggart, CEO of the Queensland Investment Corporation.

"The calculation the government put forward in its facts versus myths booklet was completely bogus and that was pointed out by the economists who criticised it," Professor Quiggin said.

"The government's response was to silently remove that calculation from its webpage. It's no longer to be found but there's no calculation that has replaced it."

Professor Quiggin said without an adequate cost-benefit analysis the sale of QR National could not be considered good public policy.

"We have no basis for telling whether the privatisation will in fact yield benefits that exceed the costs, or whether the particular model the government has chosen is going to maximise the net benefits, either in fiscal terms for the people of Queensland or in social terms for the state as a whole," Professor Quiggin said.

The Bligh government has argued throughout the debate that the sale of public assets is necessary to restore the State's triple A credit rating whilst also maintaining the sale will lead to an increased capacity to invest in schools and hospitals, he says.

Professor Quiggin drew attention to these contradictions put forward in the government's argument and the shortcomings of the budget strategy.

"There are two ways they can deal with this, one is they can forget about their rhetoric about schools and hospitals and take the net proceeds and use them to repay debt. In that case the sale will be basically neutral as far as the government's position is concerned but we won't get any extra schools and hospitals," Professor Quiggin said.

"The alternative is that they will actually imagine that this money will provide a free source of finance for the provision of schools and hospitals in which case we're storing up deficit problems for the future when the interest bills become due."

He emphasises the sale of public assets would only be a short-term solution in a bid to reduce the budget deficit and that the government needs to review the current tax base if the current level of services are to be sustained.

"Selling assets is a distraction. To the extent to which the government recognises it's a distraction that's fine. To the extent they don't and think by selling assets they've fixed their budgetary problems, they're storing up bigger problems for down the track," Professor Quiggin said.

"We've gone from a low tax and low quality service system which prevailed for most of the 20th century, to a situation where we're trying to provide services of comparable quality to those of the other states whilst still maintaining a low tax regime," Professor Quiggin said.

"The only way to resolve a budgetary shortfall is either higher taxes or lower spending."

The IPO of QR National is expected to go ahead during the final quarter of this year amidst recent volatility on equity markets.
Media: Professor John Quiggin (3346 9646 or 0432 551 381) or Christopher Maher (0411 277 411).