The Queensland Government has decided against selling off state assets in a bid to balance the budget and will instead lease them under the state’s long-awaited “Strong Choices” plan.
With an election looming next year and premier Campbell Newman struggling in the polls, the ruling Liberal National Party instead proposes to leasing out key assets in a bid to raise around $37 billion.
The government’s proposed plan will see two ports, two electricity generators, three electricity distribution and transmission businesses, industrial water pipelines and a range of non-core business activities leased for 50 years, with the option to extend for another 49 years.
The plan is the result of unprecedented community consultation program in which Queensland voters red-flagged the idea of asset sales. Now, six months out from the next election, it’s Newman’s campaign manifesto as well as his blueprint for combating the state’s $80 billion debt bill. The government estimates it will rise to $121 billion by 2022 if no action is taken.
Queensland’s state debt is the largest in the country, with economic experts warning debt must be reduced by at least $25-$30 billion in order to bolster the economy.
Here is an excerpt from the the plan’s executive summary:
In response to Queenslanders’ concerns, the Government has decided not to sell the assets. The decision was made to replace that aspect of the debt reduction strategy with an alternative that will allow Queenslanders to retain ownership of the assets, while still delivering the best possible financial outcomes for the State.
The Government now proposes to offer assets previously intended for sale or private investment for lease only should the Government receive a mandate at the next State election.
The assets available to the private sector are power generators Stanwell Corporation and CS Energy Ltd; the power transmission and distribution companies Energex, Ergon and Powerlink; the ports of Gladstone and Townsville, Mount Isa Railway, SunWater’s commercial pipelines and a range of state corporation-run businesses.
The government is banking on $37 billion from upfront lease payments, which will be split three ways.
About $25 billion will go towards reducing state debt, $8.6 billion will be allocated for future investment and infrastructure, while $3.4 billion will fund a reduction in cost of living pressures.
The Strong Choices Future Investment Program itemises how the $8.6 billion will be spent (see table below), however, the government is keeping tight-lipped on how Strong Choices Cost of Living Fund will be distributed.
Business industry representatives said funds received from privatisation must not be “frittered away” on short term gains.
“Queensland business and industry will be keen for clarity on how asset lease proceeds will be spent… we will be examining revenue expenditure proposals contained in the plan closely in coming days,” Australian Industry Group (Ai Group) Queensland Director Jemina Dunn said. “Government needs to be careful any revenue from privatisation is not frittered away on projects that do not contribute to long term productivity gains.”
Queensland treasurer Tim Nicholls said the assets will be leased under strict conditions and some returned to state control by 2064. The government is keen to ensure power prices remain uniform statewide.
Earlier this year, the NSW Government leased the Port of Newcastle for $1.754 billion to Hastings Fund Management and China Merchants, with the majority of funds received dedicated to infrastructure fund Restart NSW.
The Port of Melbourne will be listed for sale in early 2015, with an estimated value of more than $5 billion.
In 2013, NSW Ports leased Port Botany and Port Kembla to a consortium lead by Industry Funds Management for $5.07 billion.
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