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Queensland Budget 2014: The $33 billion gamble - how will it work?

Date

Amy Remeikis

Plans for the privatisation of Queensland assets as outlined in the budget.

Plans for the privatisation of Queensland assets as outlined in the budget. Photo: Simon O'Brien

The government is gambling on an untested and untried method of private sector investment to get its $33 billion plan to reduce debt and build infrastructure across the line.

The plan, to retain ownership of Powerlink, Energex and Ergon, but share the income the businesses generate with the private sector in return for investment in the network – a sort of debt swap – was announced by the government at the same time it handed down its budget.

It hopes to raise $25 billion under the plan but it won’t say how. Nor will it give details of who could be interested or even how it would work.

Treasurer Tim Nicholls said it was something that “has never been proposed before in Australia”.

“That involves the state retaining ownership of the shares in that business, but agreeing to share the income, the profits of those businesses with the private sector and in return the private sector has to pay a premium for that share and also to help with the cost of the expansion of that network,” he said.

“We are proposing retaining ownership but inviting the private sector to inject capital to replace the government debt with private debt.

“If we go down that path our debt will be reduced by $25 billion, our interest payments will be reduced by about $1.3 billion and then we will also have funds to spend in the future.”

It forms the bulk of the government’s ‘The Strongest and Smartest Choice plan’ which aims to raise $33.6 billion.

That money will then form the framework of how it plans to reduce the debt with 75 per cent of the proceeds, or $25 billion, being used for debt reduction.

The rest, a shave over $8 billion, is to be used as a treasure chest for infrastructure and community building spending but again Mr Nicholls could give no details on a time line, how he plans to deliver the government's wish list or, more importantly, what would happen is the private sector did not come through.

Mr Nicholls said all would be eventually be revealed but that would take time.  The sale/investment plan, if the government is re-elected, is scheduled to take place across six years, or two terms of government.

As to what the money will be spent on, that won’t be finalised until September following public consultation.

The treasurer said he wanted a “very careful, planned and methodical” approach to the entire proposal, adding that he was prepared to wait until the government received the value it believed its investment and sale opportunities were worth.

For Labor it was an opportunity to showcase a major policy difference, shaped by bitterness and regret of its own hard learned lesson on the topic.

“The Premier’s answer is to sell off everything he can get his hands on, but that will only lead to more job cuts and higher power prices,” Opposition Treasury spokesman Curtis Pitt said.

“Queenslanders don’t want more asset sales and they don’t want even higher electricity prices.

“Labor stands with the people of Queensland in their opposition to Campbell Newman’s asset sales.

“The choice is now clear: the LNP will sell your assets, Labor won’t.”

Electrical Trades Union state organiser Stuart Traill said the government was “privatising the rewards while keeping the risks”.

“They have failed the cost of living test and they have been found wanting on the economic impacts of their incompetence," he said.

"The budget, despite all the service and job cuts and higher prices, has blown out by a staggering $1.6bn” he said.

But the devil is in the detail – and at this stage, that’s something no one can provide.

This means 10 months of hard sell of a policy shell, helped with a soon-to-commence $5.2 million advertising campaign, and a government counting on a patient constituency. 

46 comments so far

  • How will this reduce the cost of energy?
    The private investers are going to want some return which we all know we will pay for in price hikes.

    Commenter
    AC
    Date and time
    June 04, 2014, 6:27AM
    • It won't. This government insists on putting carbon price increases on bills and blaming everything on the carbon tax, when data Australia wide shows that privatisation leads to much higher electricity price hikes.

      The carbon tax does bugger all to your bill compared to rising fuel prices and business cases based on 19th century power infrastructure models.

      Even the miners are moving from diesel generators to solar power for their remote mines. The writing is on the wall for fossil fuels, but the Liberal party won't admit it.

      Commenter
      Suido
      Date and time
      June 04, 2014, 9:10AM
    • @suido
      "Even the miners are moving from diesel generators to solar power for their remote mines.
      The writing is on the wall for fossil fuels, but the Liberal party won't admit it."

      I was reading they have budgeted for a recovery in coal. I have not read anyone else suggest this will happen. Even the Liberal premier of WA said coal was in structural decline. Banks are even saying Galilee is uneconomic yet we live in the past. That bothers me to the point perhaps a move is in order? So many ways to go forward yet they choose to pin our future on blind faith.

      Commenter
      Happy Not
      Date and time
      June 04, 2014, 10:15AM
    • The most recent nail in the coffin for coal was the Indian elections. Their new leader had massive success at state level in moving the energy market away from coal, and has promised to do this at the national level.

      Japan, China and India are the main coal importers, but there's no growth in Japan, reduced growth in China (fueled by investment in renewables and anti-pollution measures) and massive uncertainty over India's long term imports. Supply is outstripping demand, mines in Qld are on the brink of closing and are just trying to hold out until someone else stops production first.

      The Abbott point port expansion (Great Barrier Reef dredging project) is purely to serve increased coal exports, and I think it is likely to become a stranded asset, worth pennies in a couple of decades after being built for billions.

      It's ludicrous.

      Commenter
      @Happy Not
      Date and time
      June 04, 2014, 10:58AM
    • 100% correct. Look at New Zealand, privatisation has done nothing but drive up energy prices. v

      Commenter
      bamboosolid
      Location
      Brisbane
      Date and time
      June 04, 2014, 6:25PM
  • Can this current government do no wrong? It's hard to fault any decision they've made since coming to power and I can't wait for the "strong choices" part 2 campaign.

    Commenter
    Lord Derp of Derp
    Location
    Derp
    Date and time
    June 04, 2014, 7:00AM
    • I'm sure the pensioners of Queensland don't see it that way. Why have a media campaign for $6 million when the decision was already made done and dusted and to rub salt in to the wound they're going to spend another $4.4 million plus of tax payer funded 4 month pre-election media blitz on behalf of the LNP....

      Commenter
      Tim
      Location
      Inner City
      Date and time
      June 04, 2014, 8:11AM
    • @Lord Derp of Derp
      I am thinking your comments are made tongue in cheek.
      If not then maybe you need to change your post name to Lord Twerp of Twerp.

      Commenter
      John Forrest
      Location
      The Gap Q
      Date and time
      June 04, 2014, 8:12AM
  • How can you have a budget with a tag line of "all would be eventually be revealed but that would take time".
    Come on LNP, you were elected to fix the State, not keep us in the dark, or is it that you are still trying to work out what you are doing.

    Commenter
    Scotty
    Date and time
    June 04, 2014, 7:03AM
    • I do believe their next $5.5 mil campaign believe is called 'Spun Solutions'.

      Commenter
      Drewbitz
      Location
      Brisbane
      Date and time
      June 04, 2014, 10:11AM

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