Queensland Treasurer Andrew Fraser introduced his second budget into state parliament today with a deficit of half a billion dollars. Fraser said the worst set of global economic circumstances in 75 years has resulted in rising unemployment and revenues from transfer duties, GST and royalties taking a battering. Just as the impact of the so-called federal “horror” budget was muted by advanced leaking, most of the key items in Queensland’s budget were in the public domain before Fraser gave the details to parliament in Brisbane today.
Fraser said today’s budget had a dual function: to support the economy during the financial crisis and to “chart a course for a new future beyond these dark hours.”
He announced a “colossal drop” in forecast revenue of $15 billion due to shortfalls in the key revenue streams of royalties, taxes and GST. This will result in a deficit of $574 million, which is a lot better than $1.5 billion deficit forecast in February but will still not return to surplus until 2015-2016. The state’s economy is forecast to contract by 0.25 of a percent in 2009-2010 before returning to modest growth the following year. Unemployment is also trending upwards from 6.50 percent in 2009-2010 rising to 7.25 percent the following year. This means an additional 175,000 people on the dole.
Fraser said the centrepiece of the budget was an $18.2 billion capital works program with funding for roads, ports, schools, transport and other infrastructure. This capital outlay will support 127,000 full-time jobs. The Abbot Point coal terminal will be expanded at a cost of $305 million, there will be a Bundaberg ring road at $100 million, and $464 million will be spent on the Gold Coast Rapid Transit. In Brisbane, $259 million goes towards the Gateway duplication and another $125m is spent on the new Houghton Highway Bridge. Disappointingly not much will be spent on public transport.
Hospitals and health facilities account for $1.3 billion with new hospitals at Mackay (2013) and Gold Coast University Hospital (2012). There is also funding for a research facility at the new Queensland Children’s Hospital at Brisbane’s Mater. The budget provides for 645 more doctors, nurses and health practitioners, 350 more teachers and teacher aides, 200 more police and another 50 ambulance officers.
There will also be $300 million for new school facilities plus another $150 million for climate change and Barrier Reef protection packages. $57 million will go to a “green army program” to create 3,000 jobs by improving waterways, beaches, national parks and green spaces. The government also abolished stamp duty for first home buyers who purchase vacant land to build their first home up to $250,000 with a further concession to land up to a value of $400,000.
The government announced its revised fiscal principles designed to save $5.4 billion over four years. This figure does not include asset sales. The 8c fuel subsidy will be abolished saving $2.4 billion. There will also be a “public sector efficiency dividend” of $280 million a year from 2009-10 which the government says will not impact on “front line service delivery”. But what will go are local government grant and subsidy programs. Motor vehicle registration will increase from 1 June. The tax rate on casino gaming machine wins will go from 10 percent to 20 for Townsville and Cairns and from 20 percent to 30 percent for Brisbane and the Gold Coast. Apprentice and trainee wages will be excluded from payroll tax and the government will extend a further 25 percent rebate on these wages. But Fraser said the government’s own wage bill will only increase by 2.5 percent with MPs to continue their pay freeze.
The budget announced more details on the controversial asset sales not factored into budget estimates. The program has a strong export focus and will involve the sale of Forestry Plantations Queensland’s softwood business (and possibly also its hardwood plantations business), Queensland Motorways Limited, the Port of Brisbane, Queensland Rail’s coal businesses and Abbot Point Coal Terminal. The sales will be staggered over three to five years and the government expects them to raise $15 billion. The sale will also mean that $12 billion in required capital investment over the next five years will be avoided – however it is not certain that this capital investment is factored into the likely sale price.
The Queensland Greens have come out against the asset sales saying that control of these utilities is essential in making a smooth transition to a low carbon economy. The Greens will scrutinise climate change components of the budget. The government supports the CPRS (Carbon Pollution Reduction Scheme) and in its Toward Q2: Tomorrow’s Queensland document the Government has set a target of cutting Queensland’s carbon footprint by a third by 2020. Key budget initiatives include the Solar Hot Water Program, investment in the Geothermal Centre of Excellence and $7 million towards the development of a 10MW solar thermal power station at Cloncurry. These measures are dwarfed by the $300 million Clean Coal Fund which is of dubious environmental benefit but keeps the government’s industry friends happy. Anna Bligh’s government has a long way to go before it is weaned off its love affair of coal.