Why do household costs always rise?
This is a rather large question to answer, and no politician seems willing to comment or provide a satisfactory answer for the public, at least none that I have personally heard. Instead the T.V bombards us with financial reports daily and we are all expected to nod in agreement and mutter things like “oh yes, electricity costs are going up again”.
So most of us, we blink twice and flick the channel over to something more entertaining. The reality is though, no one really knows what’s going on or why inflation exists or even the question I started with, “why do household costs always rise?” or even “why do electricity prices increase?” Australia owns all the coal, electricity should be the cheapest to produce in the world wouldn’t you think?
I can’t answer the whole question in this brief account, but I can I believe, provide some insights and attempt to answer a significant portion of the question. In my attempt to be as clear as I possibly can on the subject, I will at times quote directly from references, or paraphrase where I believe the jargon used, makes it unreasonably difficult to quickly understand for the reader.
The State Government problem
For reasons unknown to me thus far; in 1988 the Queensland Government passed the statute for the ‘Queensland Treasury Corporation Act 1988’ and created the biggest credit card (Queensland Treasury Corporation) the State had ever seen. And when they created this credit card, it came with some pretty amazing features and some very frightening implications for the people of Queensland. Some of the features of this credit card include:
To borrow, raise or obtain money in Australia, or any other place for that matter
to advance money or to make money available outside Australia
to act as the central borrowing and capital raising authority for the statutory bodies of the State
“to provide a medium for the investment of funds of the Treasurer, statutory bodies or other persons;…”
Make loans, advances of money or enter into any financial arrangements either in Queensland or anywhere as a lender, “as it thinks fit.”…this includes with or without security, determining interest rate (if any) and on terms of repayment the corporation thinks fit.
Receive and pay commissions to statutory bodies or, persons
–source, section 19, Lending powers of Corporation (QldTreasuryAct1988)
The corporation (“QTC”) can take land, acquire property and do pretty much anything you and I cannot legally do, and oh yeah, this corporation “QTC” is wholly exempt from the Corporations Act 2001.
So what would you expect the implications of this unlimited credit card might be? Well in my opinion, it’s exactly the same scenario if you were to give your credit card and pin number to an adolescent teenager for a weekend of fun and tell them “go nuts!!!”. At first they will be a little hesitant, possibly looking over their shoulder waiting to see how you react when they withdraw the first $20 dollar note, but very quickly they will become amazingly confident in withdrawing large sums of cash and blowing it on any number of useless throwaway items.
Most of us grew up with the understanding, if you don’t have the money for it you don’t buy it or you save up. Obviously times have changed, costs of living have increased, housing and land prices have risen, and if we want to purchase our own home we need to go into debt with the bank to afford it. BUT one of the reasons we have unreasonable housing costs, is because the State Government no longer directly uses taxes for their intended purpose i.e. paying for infrastructure, maintenance, public services. No, now our TAX’s are diverted into the QTC credit card first, which pays for any number of things including servicing the interest rate owed to foreign investors.
In review of the Treasury annual report 2009/10, QTC paid a whopping $627,428,000.00 Million in interest, which is up on last year’s figure by a massive 51% on the previous year.
So when you realise that QTC has to pay off that amount of interest each year, and it collects the income from all of us through Electricity, Water, Transport etc. It would have to bring a minimum 6% annual increase to the costs of living as a base standard, which in rough terms happens to be the interest rate QTC requires from Local Councils and other bodies when it grants new borrowings/loans.
The problem is being compounded at the local level, with Councils being pushed to rely on loans from QTC rather than obtaining grants (interest and repayment free) from the State Government, which used be the ONLY way Councils could raise enough capital to fund large infrastructure developments like building dams or sewage treatment plants.
It’s really a simple situation, Government at all levels are addicted to debt, and they live for the moment just like adolescent teenagers. If we collectively decided overnight that we will cut up the corporate credit card and throw the pieces in the bin, it wouldn’t be a surprise to see electricity prices stabilise, public services rise and the standard of living begin to rise again.
Queensland Treasury Corporation Act 1988
Queensland Treasury Annual Report 2009/10
Background on Queensland Treasury
Queensland Treasury is responsible for three statutory authorities:
Motor Accident Insurance Commission (MAIC)
Established under the Motor Accident Insurance Act 1994, the Motor Accident Insurance Commission is responsible for regulating and managing Queensland’s Compulsory Third Party (CTP) insurance scheme and the Nominal Defendant Fund.
For more information, see the Motor Accident Insurance Commission website.
Queensland Future Growth Corporation (QFGC)
The Queensland Future Growth Corporation was established under the Future Growth Fund Act 2006 to administer the Queensland Future Growth Fund. The Queensland Future Growth Fund provides funding for infrastructure and initiatives that will benefit the future economy of Queensland.
For more information, see the Queensland Future Growth Corporation Annual Report.
Queensland Treasury Corporation (QTC)
Established under the Queensland Treasury Corporation Act 1988, the Queensland Treasury Corporation is the Queensland Government’s central financing authority and corporate treasury services provider.
For more information, see the Queensland Treasury Corporation website.
The 15 QLD Government-owned corporations
• CS Energy Limited
• ENERGEX Limited
• Ergon Energy Corporation Limited
• Queensland Electricity Transmission Corporation
Limited (Powerlink Queensland)
• Stanwell Corporation Limited
• Tarong Energy Corporation Limited
• Queensland Investment Corporation Limited
• Far North Queensland Ports Corporation Limited
• Gladstone Ports Corporation Limited
• North Queensland Bulk Ports Corporation Limited
• Port of Townsville Limited
• Port of Brisbane Corporation Limited
• Queensland Rail Limited (from 1 July 2010)
• QR Limited
• SunWater Limited
Background on Queensland Treasury Corporation (“QTC”)
Queensland Treasury Corporation operates as Queensland’s central financing authority and corporate treasury services provider. The company sources and manages the debt funding to finance Queensland’s infrastructure requirements; provides financial and risk management advice and services to the Queensland Government and its public sector customers; and invests the state’s short-to medium-term cash surpluses. It offers various corporate financial advisory services, such as procurement and tendering, project evaluation, financial modeling, and cost of capital, and full cost pricing. The company also provides various borrowing products comprising client specific pools, generic debt pools, government debt pools, fixed rate loans, working capital facility, and whole-of-government leasing facility. In addition, it offers various investment products; risk management services for interest rate, commodity price, foreign exchange, and liquidity risks; and various training courses. The company was founded in 1988 and is based in Brisbane, Australia.