February 14th 2015


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Articles from this issue:

QUEENSLAND STATE ELECTION Governments want belt-tightening, but voters want jobs

CANBERRA OBSERVED The Coalition government's self-inflicted troubles

SOCIETY Joblessness drives the retreat from marriage

EDITORIAL IPCC pushes for new binding climate treaty

NATIONAL AFFAIRS What's behind the Australian Liberty Alliance?

ISLAM Middle East's bishops urge Christians to work with Muslims

NATIONAL AFFAIRS Productivity Commission's IR inquiry doomed before it starts

POLITICAL PARTIES Why Victoria's Liberals are perennial losers

INTERNATIONAL AFFAIRS Greece launches diplomatic offensive against EU austerity program

INTERNATIONAL AFFAIRS UK-US special relationship 'hanging by a thread'

CULTURE Further inquiries into the case of Sherlock Holmes

LETTERS

BOOK REVIEW Chronicle of a world we have lost

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QUEENSLAND STATE ELECTION
Governments want belt-tightening, but voters want jobs


by Luke McCormack

News Weekly, February 14, 2015

NW front-cover photo of Campbell Newman: © Andrew Kasper, 2011. 

Queensland voters have just delivered a stinging rebuke to the Liberal National Party (LNP)’s austerity program. They have rejected the continuation of the LNP’s asset privatisation and leasing plan as a precondition for future government investment in the state’s infrastructure.

Fiona Simpson MP

On Saturday, January 31, voters vented their many concerns — about rising prices, continued and affordable access to the health service, and their fears that privatisation of electricity generation would force up household electricity bills and make industries less competitive. 

The Katter’s Australian Party (KAP) conspicuously campaigned strongly against privatisation. 

At the time of News Weekly’s going to press, the state of the parties in Queensland’s 89-member single-chamber parliament is as follows: the ALP has secured 42 seats, the LNP has 39, and Katter’s Australian Party has two (Mount Isa with Robbie Katter and Dalrymple with Shane Knuth). 

Five remaining seats are too close to call. In Lockyer, One Nation leader Pauline Hanson is currently ahead of the LNP candidate.

So who will form government?

If Labor secures 44 seats, Labor leader Annastacia Palaszczuk could form the next government, with the support of sympathetic independent Peter Wellington, who has retained the seat of Nicklin. 

However, if the LNP wins 43 seats, there is a slim chance it could negotiate for a minority government with the two Katter’s Australian Party MPs.

Given past rivalries between the LNP and KAP, the LNP would have to choose a fresh leadership team to win over the KAP MPs.

Queenslanders are a conservative bunch. They look for leaders who mirror their own self-image. One possible LNP leader is the well-respected former parliamentary Speaker, Fiona Simpson, who is not tainted with the discredited policies of the former LNP Premier, Campbell Newman. She represents a brand of modern, collaborative conservatism, and agrees with Queensland voters that the LNP doesn’t have a mandate to sell or lease the state’s assets.

The Queensland result is a warning to the Commonwealth and other state governments. 

It comes on top of last year’s South Australian and Victorian elections in which voters made it clear that, while governments are preoccupied with balanced budgets and belt-tightening, voters are more concerned about cuts to government services, rising unemployment and the ongoing decline of many industries. 

In Queensland, former Labor governments under Peter Beattie and Anna Bligh privatised numerous assets without seeking a mandate from the voters.

While the LNP’s Campbell Newman at least had the courage to argue its case for more privatisation, voters said “no”.

This presents a dilemma for both the states and the Commonwealth. Tony Abbott has said he wants to be remembered as the infrastructure and nation-building Prime Minister. 

Mr Abbott’s condition for Commonwealth funding of state infrastructure projects, however, is that the states sell off more of their assets. 

So how can states expand infrastructure development if voters oppose further asset sales, and if governments are reluctant to incur more state debt? 

The problem is part of a broader question facing many countries across the world: how can a government overcome the high levels of unemployment caused by the past eight years’ global economic slump? 

Australia for some years seemed immune from that crisis, but is now facing higher joblessness as many sectors continue to decline, while others, such as the car industry, are closing altogether. On top of that, the mining boom, which kept Australia afloat through the post-2007 global financial crisis for some years, has now ended.

In answer to this global problem, many economists such as the ABC’s financial journalist, Alan Kohler, and Harvard University’s Larry Summers, argue that, in this time of global secular economic stagnation, the only way governments can raise economic output and generate jobs is through massive government investment in infrastructure.

How can this be achieved without running up more state and Commonwealth debt? 

Here is one proposal. The next Queensland government should establish a Queensland Infrastructure Finance Corporation to fund the state’s infrastructure needs.

The Corporation could be financed by the means outlined last year by the Bank of England, without the state government having to incur budget deficits and increased debt. 

The Bank of England (BoE) is the oldest central bank in the world. Last year, it devoted two articles in its Quarterly Bulletin (2014, Q1) to explain with clarity — and to sort out the confusion over — how reserve banks and commercial banks create money.

The BoE says money is mainly created in two ways: 

First, commercial banks create money by making loans to customers. These loans are expunged when borrowers repay their loans.

Meanwhile, central banks, such as the Reserve Bank of Australia, manage the overall amount of money in an economy via their interest-rate settings.

Secondly, in times of crisis, central banks can undertake “quantitative easing”, that is, creating new money with which to buy government and corporate securities, thereby injecting spending power into the economy.

Initial finance for a Queensland Infrastructure Finance Corporation could be raised from government bonds aimed at the superannuation industry.

Such a corporation could go a long way towards funding Queensland’s infrastructure needs and overcoming its 6.1 per cent unemployment rate.

Luke McCormack is Queensland state president of the National Civic Council. 

 

Reference

Michael McLeay, Amar Radia and Ryland Thomas, “Money creation in the modern economy”, Bank of England Quarterly Bulletin, Vol. 54, No. 1 (2014), pages 1–14.
URL: www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/
qb14q1prereleasemoneycreation.pdf

 




























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