The former Labor government's capital expenditure program in 2011-12 was funded almost entirely from debt, according to the independent commission of audit to be handed down this morning.
Commissioners Peter Costello, Doug McTaggart and Sandra Harding will report that the previous state government's capital expenditure had reached a point where 96 per cent of the 2011-12 program was paid for with borrowed funds.
The proportion of capital spending in Queensland - on assets and long-term projects - funded by debt had risen from 34 per cent in 2005-06 to 96 per cent in 2011-12, according to the audit.
Labor's debt increased substantially after 2005.
Between 2006-07 and 2010-11 - while government expenses grew at an average of 10.5 per cent - government revenue grew by 6.9 per cent, the audit will reveal.
Treasurer Tim Nicholls said the figures showed the previous Labor government's spending program was unsustainable.
"The report is sober reading and reveals the state had been living beyond its means prior to the global financial crisis and the 2011 natural disasters," he said.
Peter Costello's appraisal of the former Labor government's books paints a damning picture. Photo: Paul Rovere
In its 2011-12 Mid-Year Economic Review released in January, Labor showed capital purchases of non-financial assets of $25.34 billion over three years from 2011-12.
Borrowings over the four -year forward estimates from 2011-12 would increase by $25.534 billion, Labor's Mid-Year Review document shows.
Labor said this spending allowed it to maintain employment levels in the global financial crisis.
Premier Campbell Newman has called an emergency cabinet meeting this morning to brief MPs before the audit is handed down by former federal treasurer Mr Costello and Mr Nicholls at 10.45am.
After the LNP won the March state election , it commissioned the audit to fast-track debt reduction so the new government could regain Queensland's AAA credit rating.
However in January, Labor predicted a $60 million surplus in the 2014-15 financial year - 12 months ahead of previous estimates.
It then predicted net savings of $737 million over the four-year estimates, based on a series of budget steps.
They included saving $506.5 million by deferring the Queensland Police Academy at Wacol and saving $150 million a year from 2013-14 by extending the Voluntary Separation Program to reduce the public service.
The LNP during the 2012 election campaign also said it would bring the Queensland budget back to surplus by 2014-15.
Mr Nicholls said he believed the economic recovery task was tougher than predicted.
"The magnitude of the task is substantially larger than Labor let on," he said.
After yesterday outlining where $186.5 million in cuts had been found since the LNP won office in March, Mr Nicholls declined to indicate whether asset sales or asset leasebacks may be considered by a future LNP government, as has happened in other Australian states.
"I anticipate it will raise a number of issues for the government and for the broader community to consider in terms of the choices that have to be made if we are to undertake a fiscal review task," he said.
A further mid-year budget update is expected to be held between today's audit funding at the September budget, Mr Nicholls said.