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Would you gamble $41 to win $3? - The Buy Queensland Policy does

Following my original post on the Buy Queensland Policy there has been a significant spat between New Zealand (one of nine countries that we have a Free Trade Agreement with) and Australia warning of trade repercussions following the Palaszczuk Government's move to favour Queensland businesses with a 30% weighting when they are located within 125 km of where the goods and services are to be supplied. 

The billion dollar question is can we boost Queensland businesses' percentage of State Government procurement by more than any loss of Queensland exports to Free Trade Agreement countries?  I have been able to put some firm numbers around the opportunity we are pursuing and the risk attached.

The potential up side of the Buy Queensland policy is the percentage of the $18 billion State Government procurement spend that is currently awarded to interstate and international businesses.  Minister for Housing and Public Works, Mick de Brenni, last week confirmed that at present 84% of State Government contracts are already awarded to Queensland businesses. 

Based on a total State Government procurement program of $18 billion, non-Queensland businesses are receiving a $2.9 billion slice of that pie.  This amount is the theoretical maximum benefit that can be gained from giving more procurement contracts to Queensland businesses through a 30% weighting.  The 30% weighting for the other $15.1 billion in procurement spend (already awarded to Queensland businesses) simply displaces one Queensland business for another with no net gain to the State.

At the same time the total value of Queensland exports to Free Trade Agreement countries is worth $40.7 billion.  This is the maximum value that Queensland businesses can potentially lose from retaliatory actions by FTA countries.  

So the equation is this ..... we are gambling $40.7 billion in exports to Free Trade Agreement countries to try and give Queensland businesses a maximum additional benefit of $2.9 billion under the Buy Queensland Policy.  These are poor gambling odds in anyone's books. In reality the full $2.9 billion will not be realised nor will the full $40.7 billion be lost, but there is significantly more downside than upside and in my view it is not worth it.

There are very good elements to the Buy Queensland Plan but it does not need to jeopardise our exporters through the 30% weighting. Other options are instead available that are discussed in my original post.

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