Head of the Department of Accounting, Finance and Economics, Professor Fabrizio Carmignani, on the economic priorities he would impress on the 39th Queensland Premier.
I would invite him or her to remember that public expenditure, taxes, deficit and debt are just tools that need to be used to achieve the fundamental objectives of economic policy, namely inclusive growth and welfare.
So, minimising public spending, deficit, and debt is not necessarily good fiscal policy.
Good fiscal policy instead should be characterized by two features:
(i) Public expenditure should be run counter-cyclically. When the economy is in a contraction, reducing public expenditure only makes the contraction worse. On the contrary, public expenditure should be used to help the economy recover: the data and the evidence clearly indicate that this works in Queensland.
(ii) The notion of quality of expenditure should become central. Inclusive growth is not just a matter of throwing money into some infrastructure project, but it is also a matter of spending the money effectively, prioritising quality projects. For instance, it is not enough to build schools; the government needs to worry about the quality of the education provided, the adequacy of the curriculum, the possibility for students to benefit from work-integrated learning, especially in certain areas of Queensland where the labour market is changing quickly.
I would also urge the Premier to avoid the debt obsession: we are not in a situation where debt needs to be repaid with strong choices, especially privatisation of assets.
What must done is to prevent further accumulation of deficit, and this can be achieved by ensuring that fiscal policy is run truly counter-cyclically, as noted above.
Finally, if I had thirty seconds left, I would advise the Premier to ask her or his people to pay attention to the data, especially macroeconomic data. It is simply not good political communication to say that the economy is strong when Gross Domestic Income per-capita is decreasing and the unemployment rate is increasing.