Queensland state budget review

The Queensland government delivered its 2013–2014 Queensland state budget on 4 June 2013 promising growth, rebuilding and resilience but framed by multi-billion-dollar hits from falling revenue and natural disasters.      

Key points:

  •  6.6% increase in the education budget of $707 million
  •  4.7% increase in the disability services budget – up by $64 million
  •  4.5% increase in health budget – up by $533 million; and
  •  267 new police, 724 new teachers and support staff, as well as 155 new and replacement ambulances

However, the Queensland state government is still spending more than it earns, with the 2013–2014 budget forecasting a deficit of $7.664 billion.

Treasurer Tim Nicholls says this budget “continues the path that we started to go down last year”. Mr Nicholls says natural disasters and falling government revenue have affected the state’s bottom line – “I think people understand that we are working in a tougher time than was previously the case. I’ve often described it as being a new normal – the rates of revenue growth that were previously there are not going to be there. We have to do more with less and I think people understand that message very clearly.”

The second Queensland state budget delivered by premier Campbell Newman’s Liberal National Party government is one where ambition meets reality. The state government billed its first Queensland state budget last year as the most important in a generation, charting a journey back to financial responsibility. It had promised a surplus by 2014–2015 but now it says the journey back to a fiscal surplus will be perhaps longer than it first planned and hoped for.

Fiscal balance

It projects a fiscal deficit of $244 million for 2014–2015 but it is still trying for a balance in 2014–2015.

Mr Nicholls says the Queensland state government is not heedlessly and mindlessly chasing a fiscal surplus. “We are not concocting an outcome simply to meet that target. To keep a fiscal balance within reach in 2014–2015, and to ensure borrowings in the general government sector stabilise, there will be some pain.”

  • There will be a two year wait to the planned increase in the payroll tax threshold, from $1.1 million to $1.2 million
  • Duty rates on general insurance products will increase, aligning Queensland rates more closely with those in other states, to raise $195 million in 2013–2014. The rates will rise to 9.0%, which is nearly double current rates for professional indemnity, personal injury and first mortgage insurance
  • The Urban Fire Levy will be renamed the Emergency Management, Fire and Rescue Levy and extended to all properties receiving a rates notice from 1 January 2014. It will also be increased by 6.5%, netting approximately $188 million across the forward estimates; and
  • $1200 million in savings will be found every year from departmental savings.

However, the budget papers predict by 2015–2016 fiscal surpluses exceeding $1 billion.

This Queensland state budget has been slapped by plummeting revenues – $5.3 billion since coming to office, and $4.2 billion since the 2012–2013 Queensland state budget. This is due to weak export coal prices, a reduction in the forecast share of national GST revenue, and less money coming in from the property sector from transfer duty and land tax.

Natural disasters

The Queensland state budget has also been blown off course by ex-tropical Cyclone Oswald that caused Bundaberg’s worst flooding and the summer of natural disasters – causing $2.5 billion in damage and up to $750 million in lost economic production.

Fifty-seven local government areas recorded destruction between January and March 2013, with over 2000 residents evacuated in the Bundaberg region in Southern Queensland and over 4300 properties damaged. Across the state of Queensland, 750 businesses were affected, 390,000 homes and businesses were left without power, 22.0% of state controlled roads were affected, and 3100km of the state rail network was damaged.

Public service

The mid-term Queensland state budget also seeks to lock in gains from the first Queensland state budget regarding the size of public service and the role of government sectors.

The Queensland state government is focusing on its management abilities, estimating the actual operating expenses in 2012–2013 to be $2 billion lower than originally budgeted, with total operating expenses being only 1.1% above actual operating expenses 2011–2013 levels.

The Queensland state government anticipates the lowest rate of growth since accrual accounting started in 1998–1999. The main reason being the reduction in thousands of state government employees, and keeping employee expenses under tight rein. A major feature of last year’s Queensland state budget was a massive reduction in the size of Queensland’s public service by 12,800 staff. By 2016–2017, it is expected Queensland will have fewer public servants than in 2011–2012.

Tax take per capita

The Queensland state government says Queensland’s tax take on a per capita basis remains significantly less than the average of other states – $2528 compared to $3003.

Mr Nicholls says “the Queensland economy remains strong and is growing. The economic outlook for major trading partners is forecast to improve but remains challenging. Exports are to bring Queensland back as the leader of growth by 2015–2016”.

The Queensland state government is also anticipating a big growth boost by 2015–2016, when it believes there will be a doubling in economic growth from 3.0% to 6.0%. The main factors being LNG production and the export of gas overseas, expected to yield an increase in overseas exports of 23.0%.

Unemployment is predicted to remain at 6.0% in 2013–2014, down to 5.5% in 2015–2016.

Generally the Queensland state budget measures appear to be cost neutral to small and medium enterprises in the accommodation and tourism sector. With current record low interest rates and downward pressure on exchange rates, the current economic environment provides ideal conditions for continued improvement in the accommodation and tourism sector in the financial year ahead.

Generally we are seeing a lack of consumer confidence (as expected) in the lead up to the Australian federal election in September 2013.

Economic indicators suggest, however, the economy should be delivering stronger trading results in the Australian accommodation sector than is currently being reported anecdotally.

With many infrastructure projects currently on hold pending the outcome of the Australian federal election, a strong performance in the back half of the 2013–2014 financial year is anticipated.

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