same old...

same old mistakes.

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http://www.theaustralian.news.com.au/story/0,25197,24778106-5013871,00.html

Queensland Treasurer Andrew Fraser's deficit of foresight results in taxing times

NSW one day, Queensland the next. Labor's two longest-serving state governments have confirmed their budgets are sick enough to require extra taxes in a downturn.

While Andrew Fraser's effort yesterday may, on paper, appear to be mild compared with what his NSW equivalent Eric Roozendaal produced last month, the method is the same.

A crack opens in the revenue base because of falling property tax collections, which sets the budget on course for deficit.

The state Treasurer blames the global financial crisis for the gap and says he has no choice but to increase taxes to make up some of the difference.

To the casual observer, the problem here is not that revenues have been revised down but that taxes are being increased to claw back the losses. With the economy on the edge of recession, surely fiscal policy should offer support to the community?

The Queensland Treasurer acknowledged the mixed message in his statement. "There's never a good time to increase revenues, but these decisions are necessary to return the budget to surplus by the end of the forward estimates (in 2011-12)," he said.

He explained that the taxing would not begin until July 1 next year, after the "eye of the storm" had passed. Deconstruct that sentence and you will see the real flaw in Fraser's approach. If the Queensland budget had been in structural surplus, there would have been no need to increase taxes when the recovery came.

Fraser betrays the weakness of his budget by slugging motorists, property developers and casinos. The total tax hike of $337million in 2009-10 translates to a 3.4 per cent boost to state revenue.

Queensland gambled on a never-ending property boom. Now the market has stalled, the budget is suddenly on the ropes.

Don't blame Wall Street for this. The mistake is home-grown, and every state treasurer has repeated it. State Labor treasurers didn't bank the windfalls, so they could spend in bad times such as those we are going through now. They used the proceeds, instead, to cut taxes elsewhere. In effect, they took a temporary revenue surge and returned it as a permanent tax cut.

In the process, they neutered an already narrow revenue base by placing all their eggs in the stamp-duty basket. In 2000-01, when the states first got their hands on the GST funds, property taxes accounted for 37.9 per cent of all state-sourced revenue. By 2006-07, the share had jumped to 40.6 per cent.

Queenslanders may beg to differ, of course. Their state is still forecast to grow by 3 per cent this financial year -- one percentage point above the national figure.

But by not imagining the day when the property market might go bust, Fraser has condemned his taxpayers to more pain than necessary in a downturn.