NSW vs QLD: The debt decider

While we have the State of Origin to decide which state trumps on the football field, we’ve used debt levels to decide who manages best off the field.

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As if there’s not enough rivalry between NSW and QLD in the weeks before State of Origin, we’ve decided to put the states up against one another to find out who has clocked up the most debt. Although Queensland may have slayed on the football field for the last decade, NSW may have the upper hand when it comes to debt. It appears that the Maroons may have devoted too much time on sports and not enough on their finances, as there is a definite trend between their recently-thwarted State of the Origin winning streak and their rising levels of debt.

To look at some of these trends a little closer, we’ve narrowed down a few different examples of how NSW and QLD stand up against one another in the debt decider.

Round 1: Overall debt

As noted in a study from the Centre for Independent Studies (CIS), Queensland has experienced the most dramatic decline in state finances since 2007. Although Queensland was traditionally a low spending and taxing state, their recent financial position has resulted in the loss of the state’s triple-A credit rating. Despite the new state government’s attempts to curb some of these financial issues since 2012, CIS notes that the financial benefits of these changes are yet to appear in the most recent three-year trend.

Although NSW net financial liabilities are quite high, it still has a relatively low general government net debt burden in comparison to its Queensland competitors. Given that Queensland’s financial downfall began around 2007 – two years into their recently-disrupted victory streak – and their 2014 loss happened in correlation with the QLD state government’s attempts to rebuild their economy, it’s hard to ignore the pattern.

Debt decider verdict: NSW wins


Round 2: General government net debt

What is this?

General government net debt basically refers to the financial liabilities and amount owed by the Australian federal government. The general government sector is made up tax-funded of government departments and agencies that provide non-market public services.

The CIS report demonstrated that all six states have had an increase in general government net burden in the three years up until June 2013 (the cut-off of their most recent study).

Using findings from the Australian Bureau of Statistics, Government Finance Statistics and state financial reports, the CIS calculated the following stats:

  • Queensland experienced the largest increase, with a general government net debt as a percentage of operation value of 5%, which is significantly lower than NSW’s general government net debt
  • However, this was still an increase of 40% between 2010-13 for Queensland
  • NSW had a net debt percentage of operation value of 20%
  • Although this was an increase of less than 5% since 2010, their overall general government debt remained much higher than Queensland.

The CIS have linked this debt growth to the cash deficits and privatisation of government entities within both states. Although Queensland’s debt rose faster than NSW’s as demonstrated in the graph below, the Maroons debt level still fares better than the blues in this case. But is their rapid debt growth and simultaneous extended State of Origin winning streak just a coincidence? Who knows!

Debt decider verdict: QLD wins


Round 3: Non-financial public sector net debt

What is this?

Non-financial public sector comprises of the general government sector as well as non-financial public corporations. These include government-owned trading enterprises that sell goods and services to pay back debt.

Things aren’t looking great for Queensland or NSW in the public sector. According to statistics published by CIS:

  • Queensland are coming up the highest with a net debt of approximately 65% of operating revenue – a 25% increase over the three years to June 2013.
  • NSW also experienced one of Australia’s highest rates of non-financial public sector net debt, creeping behind QLD with a net debt of almost 60% of operating revenue. This is a 10% increase in debt over the three years before 2013.
  • Meanwhile, the remaining states and territories were all floating around the 50% mark.

If these stats reflect living standards in QLD and NSW, it might an idea for Origin fans to move interstate and ditch the sport all together. AFL anyone?

Debt decider verdict: Draw


Round 4: Debt-to-GSP ratio

What is this?

Debt to Gross State Product (GSP) refers to the goods and services sold by the state to pay back debts.

According to some statistics gathered from the ABS, plus the Queensland and NSW half year review 2014-15 and published by The Conversation, the debt-to-GSP ratio in Queensland has increased considerably over the last ten years, especially since 2006-7:

  • As demonstrated in the below table, Queensland’s rate of debt-to-GSP ratio has increased from 9.73% in 2003-04 to 24.54% in 2013-14. In comparison to the other states, Queensland now has the highest rate of debt-to-GSP ratio.
  • NSW’s debt-to-GSP has also experienced a steady increase, growing from 7.98% in 2003-04 to 13.06% in 2013-14.

Given that Queensland’s debt-to-GSP percentage began escalating dramatically around 2006-7, the same time they entered what would be almost a decade-long winning streak, maybe this link isn’t a chance of fate.

Debt decider verdict: NSW wins


Contributing factors (aside from the State of Origin)

Ok, we admit it. Since the states’ levels of debt probably don’t have a distinct relationship between the outcome of the State of Origin, here are some legitimate factors that may be contributing to both states’ debt levels.

  • Economic performance. According to CommSec, NSW secured the top spot in Australia’s economic performance rankings for the first time in almost four years. NSW has also reclaimed its number one ranking on population growth and is second place in regards to business investment and dwelling starts. On the other hand, Queensland’s 6.6 per cent jobless rate is up 29.4 per cent on the ‘normal’ level and as a result has retained the fifth spot in performance rankings and sixth in relation to population growth and unemployment. This poor performance ranking and unemployment growth could be behind some of Queensland’s growing debt.
  • Financial help. As noted in a recent finder.com.au study on Australia’s growing ‘sponge society’ – or adult children receiving financial assistance from their parents – it is no secret that NSW natives are happy to receive the occasional handout. According to the study, NSW respondents depend on their parents for housing more than any other state, with 19% receiving free or low rent.
    Queenslanders on the other hand are more likely to receive a ‘once-off’ payment rather than ongoing support from their parents, and 22% are embarrassed by the financial help – higher than the national average of 19%. The lack of financial independence experienced by young adults in NSW could be taking its toll on state-wide debt levels.
  • Housing affordability. A recent study found that the time required to save up a 20% deposit for NSW homebuyers has increased by 78% since 2013. Mortgage repayments as a proportion of monthly disposable income are at 36% for Sydney and 22% for Brisbane, indicating that Sydney first home buyers are allocating 14% more of their household income towards paying off their mortgage. So in this case, it seems that Queensland has the upper hand over NSW when managing household debt.
  • Government savings. Although Queensland may be spearheading the trend when it comes to growing debt levels, the state of the entire nation is close on its heels. An International Monetary Fund (IMF) report predicts that Australia will suffer the developed world’s most significant surge in debt by 2020. In an assessment of budget policy over the last three decades in developed economies, IMF anticipate that debt will grow from 17% at the end of 2014 to 22.4% by 2020. According to IMF, the government’s overspending during financial booms is the catalyst for this prediction.

And the winner is...

It was a close call, but NSW reign victorious in the debt decider. While Queensland’s 20 State of Origin wins may have a certain advantage over NSW’s 13 victories, the Cane Toads come in second to the Cockroaches in terms of existing and growing levels of debt. But if the IMF’s predictions come true and the entire nation is inundated with debt in the next five years, does that mean we can expect a draw in the 2020 State of Origin?

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