Fuelling future growth

Written on the 13 July 2009

Fuelling future growth

Premier Anna Bligh promoted the recent fuel subsidy cuts on the grounds that savings will help reduce the state’s deficit, but SGS Economics and Planning director for Brisbane Sasha Lennon, says the move goes well beyond budget setting. To support government plans for ‘smart growth’ he tells Brisbane Business News why the savings need to be re-invested in infrastructure and public transport.

FOLLOWING Premier Anna Bligh’s announcement in early June that the Queensland Government’s eight-cents-a-litre fuel subsidy would be scrapped from July 1, the inevitable has happened and the motoring public is none too happy. But the debate (if we’ve had one?), has been myopic and underpinned by the accepted wisdom that the health of Queensland’s bottom line and AAA credit rating should be at the forefront of our collective thinking.

The Premier claims the savings to Queensland tax payers that will result from the terminated subsidy will amount to $2.4 billion over four years. For some this might be seen as little more than icing on the estimated $15 billion public asset sales revenue cake that the government claims it will earn to get the balance sheet back in order, following the hits it’s taken from the global financial crisis and the end of the resources boom.

In this context, $2.4 million over four years amounts to about 14 per cent of the total savings the Government claims its plan will deliver. So with all the heartache that a cut in the subsidy is expected to cause the average Queenslander in higher vehicle running costs and, as argued by some, higher grocery prices, I hear many asking, why bother? Politically it’s risky and frankly, given the scale of the planned asset sale, not necessary. To me, this is beside the point.

It’s easy enough to argue that doing away with the subsidy is good for the state’s finances and arguably good for all Queenslanders and that in these ‘tough economic times’ hard decisions need to be made. Certainly, fuel prices will rise — to levels experienced in other states — and motorists, particularly the many who commute to their job in the city each day from Brisbane’s far flung or even middle-ring car-dependant suburbs, will feel the pinch.

But what’s harder is planning for and acting on where the money saved might be better invested in the interests of Queensland’s long-term sustainable economic growth. There are many options for re-investment but if I was to choose one, the answer would be relatively straight forward – transport infrastructure and in particular, quality public transport.

The State Government’s Draft South East Queensland Regional Plan 2009-2031 is a strategic document with an emphasis on reducing the region’s ecological footprint while enhancing the economy and quality of life.

Future growth would be accommodated in a more compact urban form by reducing car dependence and congestion, providing infrastructure and services in what it calls ‘smart growth’ as a means to address climate change and oil price increases.

These are not just nicely worded and desirable policy statements that should hopefully make the planners, government bureaucrats and politicians feel good about themselves, but important statements of intent that need to be embraced and which can only be realised through appropriately resourced infrastructure spending. Melbourne has put forward a similar plan characterised by ‘transit-oriented communities’ where people would enjoy much shorter journeys to work, which is expected to deliver a 3 per cent boost to the city’s gross regional product (GRP). There is no reason why southeast Queensland could not deliver similar if not superior outcomes.

A 3 per cent GRP boost in current terms translates to an estimated $4 billion annual injection to the southeast Queensland economy which will raise across-the-board government tax receipts by up to $1.2 billion per annum, allowing the Government to direct further infrastructure investment where it is needed and where most of us live – the suburbs. In order to realise the objectives of the South East Queensland Regional Plan, our collective way of thinking and doing requires a change in tack, from locking in a low density, sprawling metropolis to one that is far more compact and efficient.

This will be harder to achieve if governments continue to encourage people into cars – hence, a different sort of subsidy will be required, one that addresses the inequities experienced by those households in the outer suburbs who, due to the lack of a viable alternative, will hurt the most from the removal of the fuel subsidy. Re-investment could come in the form of ‘smart bus’ networks in the outer suburbs, new rail links such as Petrie to Kippa-Ring, or heavily discounted TransLink ‘go cards’.

Dropping the subsidy goes well beyond the $2.4 million saving being promoted by the Premier and it’s important we use those savings wisely. As a colleague of mine recently said, paying everybody to use their cars in a warming environment, as the fuel subsidy did, is like paying people to use more water in a drought – it just doesn’t make sense.


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