Independent commission of audit

[somebody]

Look at it like this.  If the average bus trip is 1 km and costs $3, and the average rail trip is 15 km and costs $10.  Which is the cheapest?

This simple example is why you need to consider the lot.

Yes, but the person only travelling 1km is living a more sustainable lifestyle in that they only have a need to travel 1km.  On that basis, may well be the better value.

[ozbob]

But in the real world people live all over.  The point you seem to be missing is that to paint the figures as is in the 'Independent' Commission of Audit as the true situation is grossly misleading.  It is important to challenge such rubbish.

This is not a theoretical construct but a fact of geography, reality, and human needs.  Humans travel, as much as some would like no one to travel the reality is that is not ever going to be the case.

[somebody]

The point you seem to be missing is that to paint the figures as is in the 'Independent' Commission of Audit as the true situation is grossly misleading.  It is important to challenge such rubbish.

That point I understand.

I just don't think it's at all valid to say that QR provide the same (or more) value as BT because the passenger-km is more for the former.

[ozbob]

Agree with that.  I am not saying that one is better value than another, I simply asked a rhetorical question, there are too many variables in any case. What I am saying is that the complete picture needs to be considered.

It all comes down to using the mode of best fit for the purpose in hand.  And using the modes optimally which gets back to the whole frequency argument.

[ozbob]

Brisbanetimes --> Video response: Unions claim budget 'smokescreen'

[ozbob]

From Crikey click here!

Newman swimming in a budget that's a sea of red

Newman swimming in a budget that's a sea of red
by Ben Eltham

Queensland Premier Campbell Newman is a go-ahead sort of a leader. So it should be no surprise that he is pushing ahead with significant spending cuts to the Queensland public service. Newman and his Treasurer Tim Nicholls campaigned openly on lower government spending before this year's election. Now elected with a massive majority, the razor gang is sharpening its blades.

One of the things that Newman did on taking office was to commission an audit of the state's finances, led by former treasurer Peter Costello and veteran mandarin Doug McTaggart. Last week, it delivered its interim report.

The Premier is now taking to the airwaves to explain to Queenslanders what the audit means for the state's finances. "Just like your family budget, we need to tighten our belt and find ways to cut our spending," Newman said.

The audit paints Queensland's budget in a sea of red. The state is in deficit and will stay in the red until at least 2015-16. Queensland has therefore racked up a fair whack of debt, driven largely by the Beattie and Bligh government's big infrastructure spend in the last decade. Gross borrowing will top out at around $91 billion in the latter half of this decade.

The reason? Revenue is flat, while costs are growing inexorably. All the states and territories have a narrow tax base, and Queensland is no exception. Highly reliant on the GST and stamp duty, the states have little flexibility when it comes to raising new revenue. But the GST has not been growing as fast as it used to. Australia's consumers, gripped by a new savings habit, are spending far less than they did in the heady days of the mid-2000s. That means less GST revenue for the states.

Other state revenue sources have their own problems. Stamp duties on real estate transactions were a huge windfall in the go-go years of Australia's housing boom, as housing inventory turned over at an impressive clip. But with house prices in Queensland stagnating even before the devastating 2011 floods, fewer properties are being sold.

On the expenses side of the ledger, state governments are being squeezed by the rising cost of basic services. Health and education in particular suffer from what economists call the "cost disease" —  the tendency for wage rises in other industries to drive wages up in less productive sectors. Public sector wages have grown at above-inflation rates in NSW and Queensland in recent years.

The sorts of jobs that state government departments are offering have also changed. The Commission of Audit says there has been a significant increase in employment levels for top executives, and below-average growth in junior and entry-level positions. In other words, the wages bill is partly a result of the better educated nature of the modern public sector workforce. In times gone by, it was common to recruit public servants straight out of school at entry-level positions. These days, it is more usual to hire university graduates, who start in the public service in mid-level roles.

State governments have responded to the tough fiscal position with a bout of austerity. There have been significant job cuts in the public services of Victoria (4100 jobs), South Australia (5100 jobs) and NSW (up to 10,000 jobs). Queensland looks set to lose as many as 20,000 positions.

Are the states and territories justified in their savage job cuts? That depends on your view of the appropriate size of government, and how comfortable you are with state government debt. Even small governments like Tasmania have very safe credit ratings and low debt servicing costs. That didn't stop Labor Premier Lara Giddings from delivering an austere state budget in May.

Even if their fiscal positions are negative, the states can easily service their debts. Indeed, all that state government debt on issue has been snapped up by investors, eager for safe returns in today's uncertain economy. A 2011 paper by the Reserve Bank's David Lancaster and Sarah Dowling tells us the "semi-government bond market has grown rapidly in recent years, with the market now similar in size to the Commonwealth Government bond market".

Queensland and NSW are the two main state government borrowers, with $71 billion and $54 billion in gross borrowings at the end of June 2011. Of course, this is the total amount of debt that has to be repaid; both states' net debts are much lower, reflecting the investment assets they own. And if we measure gross debt as a proportion of gross state product — the same measure often applied to indebted nations like Greece or Spain — then we can see that none of the states is dangerously indebted.

Queensland is the most indebted of all the states, and its gross debt tops out at about 20% of gross state product. This is uncomfortable for the current government, but it's certainly not any kind of crisis. A state debt of around 25% of GSP is easily manageable for growing state like Queensland. In debt terms, Queensland is not Greece; it is not even the US.

Indeed, you could argue (though few have) that Anna Bligh and Andrew Fraser did the right thing for the long-term interests of Queensland by continuing to borrow to fund infrastructure investment throughout the 2000s, unlike the NSW government which deferred big picture infrastructure projects out of a fear of too much borrowing.

This underlines the point that debt and deficits are, first and foremost, a political issue. If you believe, as many Queenslanders clearly do, that a state budget running in deficit is a bad thing, and that too much debt is also bad, then you might agree with the Premier's assertion that Queensland has "20,000 more public servants than the people of Queensland can currently afford". The LNP in Queensland has campaigned aggressively on debt, repeatedly mentioning the figure of "$100 billion" in state debt — a figure that is actually a projection out to 2018-19.

And if you are a deficit hawk, there's plenty of support for that view in the Queensland Audit Commission report, which states plainly that "the State has been 'living beyond its means'". In the period between 2006 and 2011, revenue grew at 6.9% a year on average. But expenditures blew out by 10.5% a year. With GST revenue growth expected to be moderate in coming years, Queensland will stay in the red until costs can be reined in.

Whatever your view of state spending, the narrow tax base and patchy revenue growth is the real take-home message of Queensland's budget audit. It's a hard truth all the other states and territories are trying to grapple with. As Ross Gittins pointed out last week, the trouble is that the GST is no longer the growth tax it was in the mid-2000s. GST is expected to grow at 4.5% out to 2015-16. The costs of public services like health and education are rising much faster than that. But it's even worse than it looks, because health and education are excluded from the GST. As their share of private consumption rises, less and less GST revenue is captured. "Since health and education are 'superior goods' (we spend an increasing proportion of our income on them as our incomes rise), and costs in both areas grow significantly faster than other consumer prices, we can expect this erosion of the GST tax base to keep rolling on," Gittins wrote.

Until someone can figure out how to solve the dreaded "vertical fiscal imbalance", in which Canberra levies most of the taxes while the states and territories deliver most of the services, the austerity measures in state budgets will continue.

[ozbob]

From the Brisbanetimes click here!

Booklet proves state's not a basket case

Booklet proves state's not a basket case

Date July 22, 2012 - 5:58PM

The Newman government has been spruiking the strength of Queensland's economy to overseas investors while telling residents the state's a basket case, the opposition says.

Labor treasury spokesman Curtis Pitt says a Queensland Treasury Corporation booklet aimed at potential overseas investors says Queensland is in a strong economic position.

''Nowhere is there mention of a high dive into the abyss, or debt crisis, or any similar claims that (Treasurer Tim Nicholls) and the premier have been making at home,'' Mr Pitt said in a statement on Sunday.

''If it is good enough to tell investors the truth, it is good enough for the premier and the treasurer to tell Queenslanders the truth and to stop talking down our state economy.''

The Liberal National Party (LNP) publication cites ratings agency Standard & Poor's (S&P) as saying Queensland has a far lower level of general government debt relative to operating revenue compared with its international peers, Mr Pitt says.

S&P is also cited as saying the amount of money spent by Queensland on interest payments, as a percentage of revenue, is also comparatively low.

He said the book proves Labor left office with a manageable debt in the wake of the global financial crisis.

Mr Pitt also said former federal treasurer Peter Costello's audit proves the government is cutting public service jobs to fund election promises.

The audit refers to the LNP's inability to find $5.7 billion to fund its election commitments without resorting to downsizing the workforce.

Mr Pitt said Mr Newman and Mr Nicholls should have told Queenslanders before the election that money to fund the LNP's promises would come from cutting 20,000 public servants.

Queensland Treasurer Tim Nicholls and Deputy Treasurer Jeff Seeney were unavailable for comment on Sunday afternoon.

AAP

Read more: http://www.brisbanetimes.com.au/queensland/booklet-proves-states-not-a-basket-case-20120722-22hyg.html

[Gazza]

Two sets of books

[Stillwater]

Queensland and Australia look fabulous, economy-wise, when compared with Greece, Spain, Ireland and Iceland.  The treasury document draws comparisons, so it is probably saying 'we are the least bad of these basket-case economies.'

[ozbob]

Twitter

1h  Aus Dude ‏@AusDude71

Standard & Poor's said in 2011 Queensland had "Excellent financial management on very positive liquidity." http://is.gd/VIdFCG #qldpol

===============

Aus Dude ‏@AusDude71

Avainst $79 billion in borrowings, Queensland has $118.2 billion in financial assets and managed funds http://is.gd/VIdFCG #qldpol

[ozbob]

Couriermail --> Costello's Commission of Audit report urges Newman Government to sell off Queensland's assets

[HappyTrainGuy]

FFS!

[ozbob]

Would not be surprised to see an early state election, in an attempt to 'legitimise' more privatisation, and while they perceive they have the political advantage enough to withstand the backlash ...

Electricity will be sold off for sure ...

[somebody]

Would not be surprised to see an early state election, in an attempt to 'legitimise' more privatisation, and while they perceive they have the political advantage enough to withstand the backlash ...

Electricity will be sold off for sure ...

Maybe they'll just do it without the election.  Might as well hang on to a pretty much unassailable majority for as long as possible.

[Golliwog]

Would not be surprised to see an early state election, in an attempt to 'legitimise' more privatisation, and while they perceive they have the political advantage enough to withstand the backlash ...

Electricity will be sold off for sure ...

Maybe they'll just do it without the election.  Might as well hang on to a pretty much unassailable majority for as long as possible.

They could, but I think it'd be political suicide to do it that way. They've spent so long telling QLDers that they wouldn't conduct asset sales without an electoral mandate.

But that said, is anyone really surprised that they're now being recommended asset sales? I'm not.

[Stillwater]

Interesting ... Anna (she of 'everything wrong with public transport will be fixed in 2031' fame) got the heave-ho because she sold off assets without raising that action in an election campaign.  Newman has said consistently that a decision so major as sell-off of electricity assets would be taken to the people, and a mandate sought.  That said, he really has no choice, and the Costello Report was merely a legitimised instrument for him to take the matter to an election.  As to losing one or two LNP members, Newman has a majority that won't be dented much even if he lost one or two MPs.  It might stop a few ambitions for ministerial postings.

[ozbob]

Brisbanetimes --> Focus on core services, let private sector assist with rest: report

[ozbob]

Executive Summary of the Final Report

--> http://www.commissionofaudit.qld.gov.au/reports/final-report-exec-summary.php

[ozbob]

Executive Summary of the Final Report

--> http://www.commissionofaudit.qld.gov.au/reports/final-report-exec-summary.php

Page 15

Transport services

The Government faces an increasing cost burden in the subsidies that it pays to provide public rail and bus transport services. To ensure the strongest incentives to improve efficiency, the Commission considers that these services should be restructured to be delivered through contestable contracts under franchise and lease arrangements.

Metro Brisbane?

[ozbob]

Treasurer and Minister for Trade
The Honourable Tim Nicholls

Commission delivers blueprint for Queensland's future growth

The Independent Commission of Audit has delivered its Final Report to the Newman Government, outlining 155 recommendations to restore Queensland's financial strength and build prosperity.

Mr Nicholls said the Interim Report, released in June last year, revealed the shocking extent of Labor's financial mismanagement and recommended a two-stage approach to fiscal repair.

Stage One of the task was addressed in the 2012-13 State Budget through savings of $5.5 billion over three years, reducing Queensland's interest bill by $1.3 billion.

"The Final Report addresses the challenges of delivering services in the 21st century and identifies productivity as a major hurdle," Mr Nicholls said.

"It warns a business-as-usual approach will lead to more deficits and more debt.

"It says the government should look to be the 'enabler' rather than the 'doer', but also clearly identifies a range of public services that should always be funded and delivered by government."

He said the Commission had also uncovered some disturbing statistics and data.

"In 2010-11, Queensland had the highest cost of service provision of any mainland State," Mr Nicholls said.

"Public hospital expenditure increased 43 per cent between 2007-08 and 2011-12 and yet activity increased by just 17 per cent.

"The Final Report sets out a number of innovative methods of rejuvenating the public service to achieve greater productivity and better value for money. Transformation will enable the government to deliver more services at a higher standard."

Mr Nicholls said the Commission had advised that rapidly reducing the debt by more than $25 billion was needed for Stage Two to regain the AAA credit rating.

"The Commission says that achieving this would require Queensland to deliver budget surpluses for the next 50 years and recommends the State Government concentrate its limited financial resources on service delivery, rather than asset ownership," he said.

"The Newman Government will keep its promise not to sell assets without a mandate from the people of Queensland.

"The report sets out a range of other measures by which to derive funds from Government Owned Corporations (GOC) to pay down some of the debt, including significant reform to improve efficiency.

"According to the Independent Commission, the GOC model has been heavily compromised by previous Governments' decisions - the true cost of which has been hidden from scrutiny."

Mr Nicholls said the Commission had congratulated the Newman Government on its work to reduce onerous red tape and regulation.

"The bodies we have established since coming to Government - the Office of Best Practice Regulation, Projects Queensland and Infrastructure Queensland – are cutting approval timeframes, driving efficiency and ensuring there is a co-ordinated whole-of-Government approach to planning," he said.

"Asset planning under the previous Labor Government was done on an ad hoc, piecemeal basis and there was an over-emphasis on new projects, resulting in significant maintenance backlogs across health, education and transport."

Mr Nicholls said the Newman Government's 2012-13 State Budget included $200 million over two years to address maintenance issues in schools.

Mr Nicholls thanked the three Commissioners the Hon Peter Costello AC, Professor Sandra Harding and Dr Doug McTaggart, as well as the Commission's staff, for their professionalism and hard work in preparing the Final Report, which includes:

    1,000 pages
    247 charts
    36 diagrams
    127 tables
    47 case studies
    155 recommendations, broken down into 39 chapters.

"Given the time and effort taken to conduct this extensive and imperative audit, it is only appropriate that the government examine and consider it in detail," Mr Nicholls said.

"The Commission criticised the previous Labor Government for often making decisions with a short-term focus. We will not fall into the same trap.

"The Newman Government has the fiscal discipline needed to deliver the long-term economic reform that will improve the overall well-being of all Queenslanders.

"We will work to once again make Queensland an ideal place to live, work and invest – a great State of great opportunity." 

[ENDS] 1 March 2013

[ozbob]

Twitter

patrick condren ‏@PatrickCondren

.@TimNichollsMP will consider outsourcing some public transport service in this term of @theqldpremier gov @7NewsBrisbane

[SurfRail]

If this means BT will be run by private operators, that will be a start.  However, I expect what is likely to happen is that BCC will still be interpolated, like they are with the ferries (which is actually a statutory requirement in the City of Brisbane Act as I have explained elsewhere seeing BCC has the exclusive right to run public ferries in the BCC boundaries).

I wonder if there is any commentary on that in there...

If QR is franchised off, likewise I would not shed too many tears.

[ozbob]

Yes, there will be no outright sale as such. 

They will start outsourcing what they can very shortly.  For example train maintenance.

The long distance inland rail services will cease, might be replaced with coach services or they may just beef up air subsidies.

Ultimately they will try to  set up a franchise deal, similar to Melbourne for the rail network in SEQ.

There are already plenty of staff issues in Queensland Rail, and this today I think will just add to the exodus ...

Queensland Rail will probably survive ala VicTrack ...   https://www.victrack.com.au/en/we-are-victrack/about-victrack

About VicTrack
Corporate background

Under theTransport Integration Act 2010, VicTrack's role is first and foremost to support public transport and secondly to support broader government priorities, by operating commercially. 

Formed in 1997, VicTrack is a State Owned Enterprise with an independent Board with a dual reporting line to the Minister for Public Transport and the Treasurer.

VicTrack provides essential telecommunications and other services to support a safe and efficient public transport system and works closely with Public Transport Victoria and the Department of Transport.

VicTrack also works closely with other agencies and departments, rail and tram operators and local councils and community groups to support transport, government and community priorities.

VicTrack is a commercial organisation that funds its own operations through the delivery of services and by leasing land and buildings within its large property portfolio. VicTrack also aims to be a good corporate citizen by providing a range of benefits for communities, heritage and the environment, including providing hundreds of community leases at nominal rentals.

Although VicTrack is the legal owner of Victoria's railway land and infrastructure, it has no active role in delivering public transport or rail freight services. Instead, these assets are leased to Victoria's rail and tram franchisees who control and maintain the infrastructure and land they lease.

[ozbob]

Some of the pitfalls of the franchise path ...

V I C T O R I A Auditor General Franchising Melbourne's train and tram system

http://download.audit.vic.gov.au/files/ptfranchising_report.pdf

[#Metro]

But I could equally hold up reports into city rail in sydney and argue thats what you get under public provision. Melbourne train and tram passenger growth has been massive and metro pushes very hard for frequency upgrades with two timetable reviews each year. Qr hasn't managed to release it's new timetable promised a year ago. Perth shows what is possible under reformed public operation.

If anything needs to be sold, it's brisbane transport buses!

[ozbob]

Just wise to remember that franchising doesn't necessarily lead to any real improvement, what does is proper reform. The thing that has turned the corner in Victoria is the recognition of the  maintenance infrastructure neglect, and now that is being sorted Metro is able to start to implement some improvements.  Queensland Rail is now on a reform path, particularly maintenance.   I think it will more costly (as per the Victorian experience) to go down the franchise path just because Costello et al think it is a good idea, doesn't mean they are correct, prefer to see a Transperth approach from here.

I think it is unlikely that the Government would have the courage to sort out the BCC transport mess ...  until they do though the network is fundamentally flawed.

[somebody]

The awesome thing about the privatisation in Vic is that it sidestepped the gag order that automatically applies to public servants unless they are advised otherwise.  I wish this gag order would be repealed, but why would the politicians do that?

I disagree about the infrastructure.  Connex was building patronage even while running down the infrastructure.

EDIT: further to this, what side stepping the gag order has done has allowed Connex and MTR to publicly lobby for additional services which has surely helped grow their patronage down there.

[ozbob]

Problems with the infrastructure were identified in the report above.  It was (and still is in part) a major issue.

This is also a good read --> http://corp.ptv.vic.gov.au/assets/RailFranchsingOverview.pdf

[SurfRail]

The main lesson to be learned from Victoria really is "don't do it the way they did it" rather than "don't do it".

[ozbob]

Couriermail --> Outsourcing of government services key to Costello's 155 tips

[ozbob]

Brisbanetimes --> Unions plan 'relentless' resistance

[ozbob]

Brisbanetimes --> Get back in black: Costello's plan for Queensland

[Golliwog]

Anyone else note the irony in yesterday the government toting the sale of electricity assets because in private hands they can reduce their operating costs and be more efficient (i.e. maybe lower prices for consumers, but most definitely higher profits for private owners) with today's CM headline about the state owned electricity companies making too much money?

[ozbob]

Costello et al are reading from an old script.

The real narrative goes like this.  There will be no 'privatisations' as such, certainly not until there is a ' mandate ', however, outsourcing will commence forthwith. The LNP know the political risks only too well. Easier outsourcing targets will be first and they go through the various options.  The ICA will be used to support what is expedient and ignored when it suits.  Frankly, they would have been better off using local think tanks that better understand Queensland demographics etc.  The final report is being held because they do not want it destroyed by various talking heads as was the interim report.

Electricity, not really clear if ' privatisation ' is the way to go.  Queensland is a lot different than southern states, much bigger distribution issues. As you point out Golli it is earning a motza now, seems a bit silly to cut off one's nose to spit one's face. Newman is not keen on flogging it anyway.  Certainly no move on this until carbon tax outcomes clear.

There is no doubt that the SEQ rail network could go down the franchisee path, but I don't think you will see the Melbourne model, particularly pre 2005.  More of a modified approach that has sort of evolved in Melbourne, but tempered with more government (read TransLink) involvement.  Sort of a cross between Transperth and Metro Melbourne.  This might be more optimal for here.

One of the first things to be outsourced will be train maintenance according to some informed sources.   One of the reasons Queensland Rail was removed from the construction alliances was to clear the path so to speak, for options such as franchising.

We all didn't come down in the last shower ...

[Stillwater]

Agree, electricity is different here.  Look at the number of times wild storms and cyclones destroy electricity assets, yet they are repaired fairly promptly all over a big state.  A private company probably would not want to send repair crews out over the weekend because they will have to pay penalty rates etc.

[HappyTrainGuy]

Costello et al are reading from an old script.

The real narrative goes like this.  There will be no 'privatisations' as such, certainly not until there is a ' mandate ', however, outsourcing will commence forthwith. The LNP know the political risks only too well. Easier outsourcing targets will be first and they go through the various options.  The ICA will be used to support what is expedient and ignored when it suits.  Frankly, they would have been better off using local think tanks that better understand Queensland demographics etc.  The final report is being held because they do not want it destroyed by various talking heads as was the interim report.

Electricity, not really clear if ' privatisation ' is the way to go.  Queensland is a lot different than southern states, much bigger distribution issues. As you point out Golli it is earning a motza now, seems a bit silly to cut off one's nose to spit one's face. Newman is not keen on flogging it anyway.  Certainly no move on this until carbon tax outcomes clear.

There is no doubt that the SEQ rail network could go down the franchisee path, but I don't think you will see the Melbourne model, particularly pre 2005.  More of a modified approach that has sort of evolved in Melbourne, but tempered with more government (read TransLink) involvement.  Sort of a cross between Transperth and Metro Melbourne.  This might be more optimal for here.

One of the first things to be outsourced will be train maintenance according to some informed sources.   One of the reasons Queensland Rail was removed from the construction alliances was to clear the path so to speak, for options such as franchising.

We all didn't come down in the last shower ...

Don't forget the NGR's "Whole of life" contract and why it requires a seperate facility.

[ozbob]

Yes, thanks for the reminder HTG ...

Meanwhile, we are not that silly after all, are we?


Brisbanetimes --> We can keep energy assets: Queensland minister

Queensland's energy minister says there is a strong argument for keeping electricity assets in state control despite a major report recommending they be sold.

Mark McArdle says making power companies more efficient could be a better way forward - but denies he is at odds with Treasurer Tim Nicholls ...

[#Metro]

I think the report was very good in pointing out that the state has very little actual control over power operation now.

The retail sections are privately owned and operated and competitive
The National Electricity Market regulates the operations and organises selling and buying
Competitive neutrality sees Energex and Ergon are required to borrow capital at commercial rates and act like commerical companies which generate commercial return, importantly on a return on assets
There really isn't a compelling reason to own electricity generating assets.

There MAY be a reason to keep long distance electricity distribution assets, although in Victoria, even these are 100% privatised as well with different parts of Melbourne having different electrical disrtributors even though all of their poles and wires interconnect.

Sure these power companies make money, but it is a bit like cutting off your toes and eating it... its just a big churn.

In conclusion, some things may be OK to sell of, I'm a little less sure about the actual network though, but even there, they have to act and borrow at commercial rates ANYWAY and get a regulated commercial rate of return based on how much assets they have.

[somebody]

NSW certainly showed how NOT to do it.  AIUI, they sold their distribution assets but kept their generation assets.

[ozbob]

Couriermail --> Tiptoeing around a big assets sale