Australian Governments at Federal and State level face a huge challenge. Having synchronised their policy settings to lead the way to economic recovery through deficit spending, they face two important questions:
Firstly, how do they know what to spend it on?
Put another way, how should Australia’s Government sector determine what economic projects are worth spending scarce public resources on? Australia’s economy is functionally in recession, and market signals are very weak. What sort of governance framework should be used to guide the identification and prioritisation of economic projects, programs and policies?
Secondly, how do they acquire the capacity to spend it?
While the Government sector is stepping into the breach left by the retreating corporate sector, there are limits to how much deficit spending can be sustained by Australia’s economy, and there are organisational limits to Governments’ capacity to actually spend it. What might this mean for the structuring of government portfolios?
The State Governments of Queensland and New South Wales adopted similar sorts of tactics when they announced their budgets for 2009/2010.
Firstly, the States decided to spend more. Their gross borrowings will grow to $18bn and $15bn respectively in 2009/10 to fund infrastructure and capital works of $18bn each (see Economics and Market Research). Transport, utilities, health, education and housing are the big winners.
Secondly, the States are consolidating their civil services into “super departments” (13 each in NSW and QLD), to achieve operational efficiencies and integration and to ramp up their capacity to deliver the promised infrastructure programs.
Queensland has gone one step further, bringing 13 departments under six clusters. Thus the Departments of Infrastructure & Planning, Transport & Main Roads, and Employment, Economic Development and Innovation cluster under the Employment & Economic Development “mega-portfolio”.
The challenge in NSW and QLD is to refocus the strategic and operational efforts of multiple departments towards a unified end. This is a particularly tricky task in the complex and multi-dimensional field of economic development.
