POLL GIVES QLD 'FRESH START': ECONOMIST
The Queensland economy has been given a “fresh start” that should boost business and consumer confidence after the ditching of the unpopular Labor government, a leading economist says.
New Queensland Premier Campbell Newman was sworn in on Monday to govern the nation’s third most populous state after a thumping win by his Liberal National Party (LNP) on Saturday that reduced the former Labor government to just seven or eight seats in an 89-seat parliament.
“There were a lot of people sitting on their hands waiting to see what the result was,” Commonwealth Securities chief economist Craig James told AAP.
“It will inject more confidence into the economy.”
Mr James compiles a State of the States report every three months which shows Queensland is slowly moving up the board after it hit rock bottom in the wake of last year’s floods and cyclone.
While the $250-billion largely resources-based economy had scope to improve further, it was hard to see it displacing Western Australia as the No.1 state, he said.
“You haven’t got the same sort of lead in the saddlebags from tourism in Western Australia,” Mr James said.
“The high Aussie dollar certainly isn’t helping (Queensland) in terms of tourism activity.”
Mr Newman has said restoring Queensland’s Triple-A credit rating, from AA-plus, will be a top priority for the state government.
TD Securities head of Asia-Pacific research Annette Beacher believes this could be a boon for investors in the approximately $70 billion worth of state bonds issued by the Queensland Treasury Corporation (QTC), because the securities’ prices could rise to near those of the AAA-rated states of NSW and Victoria.
“However, if the return to AAA is via a slashing of infrastructure spending to reduce borrowing needs, then this lowers the growth potential of Queensland,” Ms Beacher said.
She said the state had “outsized” infrastructure needs to prepare for population growth and to capitalise on demand for its resources, particularly coal and LNG.
RBC Capital Markets senior strategist Michael Turner said the litmus test for the new government would be its first budget.
“There have been no indications as to when this will be handed down, but we hope it will be completed faster than the six months it took the new NSW government,” Mr Turner said.
Mr Newman has promised a full audit of the state’s finances will begin this week.
The Liberal/National governments of Victoria and NSW took similar action when they came to power.
In NSW’s case, its interim audit proved less dire than expected, and Mr Turner said he would not be surprised to see a similar scenario for Queensland.
“This is not to say Queensland’s finances are in great shape – they are not,” Mr Turner said.
This is already reflected in the state’s AA-plus rating from Standard & Poor’s and AA-plus rating with a negative outlook from Fitch.
“But we would treat sensationalist headlines with caution,” he said.
Mr Turner said an audit might give the new government more chance to outline fiscal priorities beyond the promise of a surplus in 2014/15 and a three per cent cap on public-sector expenditure.
Ms Beacher said QTC bond yield spreads – the interest-rate margin relative to other commonwealth and state bonds – showed little movement on Monday given the election result was expected, “even if it was more of a landslide”.
– By Colin Brinsden, AAP Economics Correspondent, AAP
