RAJ REPORT

Does the Queensland Government have any FISCAL principales like,fund social capital assets such as schools and hospitals from recurrent revenues ———Will it BORROW and increase the DEBT to fund schools and hospitals

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Since the early 1990s, successive Queensland Governments have adopted a range of fiscal principles to guide their financial management of the State. The first set of fiscal principles dates back to the 1990-91 Budget, wherein the Government identified the foundation of its fiscal strategy as a commitment to1 :  “a zero net financing requirement in the General Government sector  the maintenance of invested cash and reserves sufficient to fully meet the Government’s future superannuation liabilities and full actuarial funding of workers compensation and motor vehicle third party insurance liabilities  fund social capital assets such as schools and hospitals from recurrent revenues 1 1990-91 Queensland State Budget Paper 4, page 4 4. Previous Fiscal Principles Page 50 Queensland Commission of Audit Interim Report June 2012 Page 1 4. PREVIOUS FISCAL PRINCIPLES KEY ISSUES  Since the early 1990s, successive Queensland Governments have adopted a range of fiscal principles to guide their financial management of the State.  These fiscal principles originally set high standards of financial management which were reflected in large cash operating surpluses and a strong balance sheet.  However, there has been a progressive dilution of these fiscal principles over time, most notably: – a shift in focus away from the State’s cash position to the accrual operating balance which masked a structural weakening in the State’s fiscal position for a number of years, culminating in large operating and fiscal deficits – a loosening of restrictions on the use of borrowings in the General Government sector which gave rise to an escalation in the level of debt – a lack of focus on the fiscal balance, with significant fiscal deficits recorded from 2006-07 onwards, and projected to continue over the forward estimates period to 2015-16, thereby adding further to the debt burden.  The deterioration in Queensland’s financial position precipitated downgrades of Queensland’s AAA credit rating by the three major credit rating agencies during 2009.  The weakening of fiscal principles has also eroded the State’s financial capacity over a number of years and left the State vulnerable to external shocks, such as occurred with the global financial crisis in 2008 and the natural disasters of 2011.  Apart from the dilution of fiscal principles, the revised principles were not achieved on a consistent basis by the previous Government. 4.1. INITIAL FISCAL PRINCIPLES Since the early 1990s, successive Queensland Governments have adopted a range of fiscal principles to guide their financial management of the State. The first set of fiscal principles dates back to the 1990-91 Budget, wherein the Government identified the foundation of its fiscal strategy as a commitment to1 :  “a zero net financing requirement in the General Government sector  the maintenance of invested cash and reserves sufficient to fully meet the Government’s future superannuation liabilities and full actuarial funding of workers compensation and motor vehicle third party insurance liabilities  fund social capital assets such as schools and hospitals from recurrent revenues 1 1990-91 Queensland State Budget Paper 4, page 4 Previous Fiscal Principles 4. Queensland Commission of Audit Interim Report June 2012 Page 51 Page 2  borrow only for assets that can effectively generate an income stream sufficient to meet debt servicing costs.” However, the Budget Speech outlined only three of these commitments, omitting the reference to a zero net financing requirement. In the 1991-92 Budget, the fiscal principles remained substantially unchanged, although there was no reference to a zero net financing requirement

www.commissionofaudit.qld.gov.au/reports/interim-report-previous-fiscal-principles.pdf.

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