New Queensland Premier Reveals Plan to Divest All QR National Shares
Fresh from his landslide win, new Queensland Premier Campbell Newman has indicated his firm commitment to steer the Sunshine state away from the red column by first divesting its interests on QR National Ltd.
The state government owns 34 percent shares of the rail network worth some $3 billion and selling them off should serve as a good start in reducing the state's debt, last pegged at $85 billion, Newman said.
"We believe the shares should be sold but only at a time when we can achieve the best price," the new Liberal Premier was quoted by The Australian Financial Review as saying on Tuesday.
At the same time, Newman assured that his government will stop selling assets once the proposed QR National sales has been realised.
"That is the only thing moving in that space. We said during the campaign there would be no other privatisations," Newman said.
If it pushes through, the procedure for selling Queensland's remaining QR National shares could only commence after the company issues its financial report on August 2012, according to Business Spectators.
The plan, economists said, should serve as a good start for the Newman government, giving him cash flow to pay off state debts while allowing for some room for Queensland's budget to stabilise.
"That is an option that would certainly be worth pursuing," AMP chief economist Dr Shane Oliver told the Australian Associated Press (AAP) on Tuesday.
However, Oliver is hoping that Newman would not stop at QR National especially if he's dead serious in paring off Queensland's debt and in the process and regain the state's AAA credit rating, which could be achieved in two years time given that the new Premier will sustain his good start.
"There are a lot of state assets in Queensland which could be sold off and that is one way of clearing public debt very quickly," Oliver said.
"It shouldn't be too hard, they've only lost it fairly recently and the state debt isn't too onerous," the economist added.
Queensland's credit standings have been downgraded to AA+ by both Standard & Poor's and Fitch, two of the world's leading rating agencies.
"If they can demonstrate that the budgetary position and therefore the debt positions are going to be much stronger than previously indicated, then I think within a year or two the ratings agencies will look favourable towards that," Oliver said.
Once the AAA rating has been reclaimed, Queensland will enjoy more breathing room as the government will be servicing lower borrowing costs as against to its present interest rate of 5.39 percent for 10-year bonds, Oliver said.
At the same time, Oliver warned that Newman should exercise prudence in implementing spending cuts, which he said a too steep level could lead to alarming job losses.
Such spectre would deliver severe blows to the state economy and could come at a time when the government was taking pains to push it to recovery status, the economist said.