Palmer's confidence trick won't work

As Clive Palmer sells his own solution to Queensland's approaching fiscal iceberg, he risks sinking the only fix possible for the state's distressed budget.

Clive Palmer launched a withering attack on Campbell Newman last night in response to the Queensland premier's $1.6 billion per year increase in mining royalties, and his ambitious plan to make 14,000 public servants redundant by 2015-16.

It won't fix the budget, argued Palmer, and will create such a backbench revolt within the Liberal National Party itself that Newman will be ousted from the top job by Christmas.

For Newman, such rants from Palmer are just 'grandstanding', while Palmer makes it clear on each occasion that it's the leadership team of the LNP, not the party itself, that needs to go.

Political comment is not his only kind of grandstanding, of course. Palmer made headlines in July when he unveiled detailed plans for his 'Titanic II' cruise-liner, complete with an on-board casino that will be off limits to pesky pensioners.

But that's just a bit of fun. Palmer's tirade last night was full of his characteristic care and affection for the people of Queensland, and protection of the "front line services" that Newman is undermining with all the job cuts. (That prompted Lateline host Tony Jones to suggest "some people'll be scratching their head listening to this interview and wondering whether Clive Palmer really is an old-style LNP conservative or in fact is a Teddy Kennedy-style Democrat?")

It's as if both Palmer and Newman agree the iceberg is there, but are wrestling for the wheel of the HMAS Queensland, fundamentally at odds on which way to steer to avoid it.

Newman thinks that an extra $1.6 billion in mining royalties, supplemented by savings in this year's budget of $1.2 billion from public service cutbacks, is the appropriate plan to begin chipping away at the state's gross debt of $85 billion.

Palmer thinks that's a spit in the bucket – servicing that debt costs about $4.5 billion a year, so the job cuts and royalty hikes won't make much difference.

Instead, he wants to "get this state going... by having confidence, doing quick approvals, getting large projects, getting investment, getting more government payroll tax, royalties and investment. You've got to have a positive go-forward, not a negative wind-down".

The quick approvals would presumably be for Palmer's own projects – a massive tourist development plan around Maroochydore, and a rail plan to open up his Galilee Basin assets. Who knows, perhaps he'll even emulate the plan mooted in Western Australia in the 1980s to tow Antarctic icebergs to Fremantle to provide Perth with fresh water – Clive could moor one off the beach at Maroochydore and sail his super-cruiser past in the ultimate act of derring-do. That would at least entertain the pensioners locked out of his gaming rooms.

But back to the fiscal iceberg. As painful as Newman's cuts are, they are at least an attempt to put the state budget back into a position of structural surplus – the real trick that all governments, state and federal, must pull off in the years ahead.

I won't claim an intimate knowledge of what the Newman service cuts mean to the people of Queensland, and I'm sure Newman's plunging opinion poll standing will tell that tale.

However, Palmer's populist call to leave public servants and miners well alone, is the wrong approach. 'Confidence', as Palmer puts it, has flowed into the state from decisions made in Beijing, not Brisbane. Palmer is one of the greatest beneficiaries of China's stimulatory fixed-investment boom, and should be aware as anyone that uncertain growth prospects in China will continue to hit confidence in the years ahead.

For those years, a return to Bjelke-Peterson-style 'quick approvals' and a confident attitude are not enough – the state government has to find a long-term way to balance revenues and services.

I'm not confident, at first blush, that Campbell Newman has got that balance right. But being white-anted by his back bench – which is what Palmer believes is already underway – seems unjustified when the only other solution seems to be creeping public debt and the faith that a buoyant business community, injected with old-style confidence, will turn the ship around. The architects of Titanic I had a similar kind of faith.

What's called for is hard-headed reform which inflicts a measure of pain now, to avoid calamity in the years ahead.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles