Tax hikes on table amid Qld debt crisis

The Queensland government has ruled out selling public assets before putting it to voters, but tax hikes are being considered to tackle the state's debt crisis.

Former federal treasurer Peter Costello on Friday described his audit of the state's books, and recommendations to repair the economy, as a "menu" of options the government could consider.

Treasurer Tim Nicholls immediately ruled one of them out.

Queensland landholders won't be slugged with a $100 levy per property, a measure that would have raised $200 million annually.

The impost was not in line with the government's commitment to lower cost of living, he said.

But other tax hikes are on the table ahead of the September budget. They include the prospect of raising mining royalties and gambling taxes.

"We will certainly look very closely at the impact of the royalties and the gaming," Mr Nicholls told reporters.

"There are a suite of menus, I want to emphasise we haven't made any decision yet on that."

Mr Nicholls said the government would seek an election mandate before pursuing any asset sales.

"It is something that's in the mix for consideration," he said.

"I emphasise our commitment was that we would not engage in asset sales without seeking a mandate from the people. That commitment remains in place.

"That's why I think this is a two-stage process.

"Our ... immediate action is to stop the rot. That's what we'll be doing first and that does not involve asset sales."

Mr Costello said the second stage of economic repair, with it's recommended asset sales, was important for restoring Queensland's credit rating.

"Queensland won't get AAA without a major debt reduction," he said.

"That's a second stage to be done after you've arrested the decline."

He described his two-phase recovery in medical terms.

"The patient's in critical condition. We need to stop this patient's vital signs from disappearing before we go into the radical surgery," he said.

The report also recommends retaining a three per cent cap on public service wage growth.

Mr Nicholls said the government would legislate on this if needed.

"We will consider the options necessary if we can't achieve it through the normal processes that are in place," he said.

The treasurer again refused to rule out cutting permanent public service jobs, and acknowledged the uncertainly that would create in the months before the next budget.

"Our desire is to work as hard as we can to protect as many jobs as we possibly can. That's our going in position," he said.

Mr Costello said the options to curb public sector expenses were limited.

"There are two variables here - there is the amount of the wage increase and the amount of people that get them," he said.

"It's pretty obvious once you think about it that we want to protect numbers you've got to keep wage claims down."

Mr Nicholls said the last budget delivered by Labor was cast in the most optimistic terms as it headed into an election.

"The last budget was a document that was presented for political purposes," he said.

"It wasn't presented to give the people of Queensland an accurate ... description of what the state's finances are."

One of its "heroic assumptions" was a projected 14 per cent increase in property transfer duty, which Mr Nicholls described as "cloud cuckoo land" stuff.

Employee expenses running at nine per cent were forecast to drop to three per cent.

Mr Costello said it was important to correct the "very, very optimistic" starting point of the budget.

"It's not the real world; that certainly wasn't the experience of the last five years," he said.

Mr Nicholls blamed the former Labor government - not Treasury - for the numbers.

"I think the former government chose the most optimistic outlook of the suite that was presented to them and they did so to enhance the numbers in the budget," he said.

"If the former state treasurer had been on the job those numbers would not have been put in the documents."

Former Labor treasurer Andrew Fraser declined to be interviewed about the Costello audit's findings on debt on Friday morning.

The audit expects the state's debt to be $64 billion in 2011/12, and to hit $92 billion in four years.

Mr Nicholls said it would hit $100 billion by 2018 unless drastic action was taken.

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