Economists say the Crisafulli government will be forced to break an election promise by either slashing from the public service or imposing higher taxes on Queenslanders to control spiralling debt.
The warning comes after a spike in inflation is almost certain to trigger a pay bump of up to $500 to more than 100,000 public servants, heaping further pressure on a state budget that is forecast to deliver annual deficits over the four-year forward estimates.
Brisbane recorded a nation-high inflation figure this week of 5.2 per cent, spurred by the end of electricity rebates, and the March figure was on track to remain above the 3 per cent pay bump figure.
Any inflation-adjusted increase to public service wages will also be backdated across the entire financial year, and form the base pay rate from which future rises are also calculated.
The growing cost of the public service means the government is caught between two competing election promises, according to AMP chief economist Shane Oliver.
The Liberal National Party was elected in 2024 on a promise to control debt through stable and conservative fiscal management.
But with the ghost of the Newman era lurking and that previous LNP government’s notorious and wildly unpopular slashing from the public service, now Premier David Crisafulli promised there’d be no cuts.
And to stave off any electioneering from Labor, he also pledged not to lift or introduce any taxes – leaving the government now in a tricky position, Oliver said.
“Whichever way you cut it, if the state of Queensland is going to face higher wages costs that means if they’re going to make their commitments on the budget, they’ll have to cut back somewhere else – hire less workers, cut back on CapEx [capital expenditure], cut back on services,” he told this masthead.
“That’s the dilemma a government faces in this environment.”
Without a hardline stance on expenditure, Oliver said the state is at greater risk of a credit rating downgrade which would increase repayment costs and send debt spiralling further.
Former federal Treasury official and Brisbane-based director of Adept Economics Gene Tunny said the government is saddled with a structural budget problem – spending too much compared to revenue being raised.
“That’s a fundamental problem that they need to address,” he told this masthead.
“There’s a problem if you have to borrow to pay the wages of public servants and to effectively keep the lights on.
“It’s just basic arithmetic … you can try and reduce your public service head count, or you can increase taxes and charges.”
Both economists said the window to embark on the politically risky economic reforms was closing. They say the first year of a four-year election cycle was the ideal time to slash and then repair confidence with the electorate before the 2028 poll.
Despite the warning from the economist, Treasurer David Janetzki said the government would stick to its pledges to not cut from the public sector and not introduce new or increased taxes.
“We’re doing what we said we would do by delivering a stronger public service and saving the services and projects Labor did not budget for,” he said in responses to questions from this masthead.
“The former Labor government promised 26 times there would be no new or increased taxes and they broke that promise, in contrast we are delivering what we promised: no new or increased taxes.
“We have been disciplined as we take the next step on the long journey to budget repair.”
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James Hall is the News Director at the Brisbane Times. He is the former Queensland correspondent at The Australian Financial Review and has reported for a range of mastheads across the country, specialising on political and finance reporting.Connect via X or email.From our partners
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