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Queensland budget: More tax and debt as state weathers economic storm
Queensland Treasurer Jackie Trad has defended the state's ballooning $90 billion debt as necessary to shore up the state's economy, while revealing expanded taxes will boost the budget's bottom line.
Handing down her second budget as Treasurer and the fifth for the Palaszczuk government, Ms Trad said the state government's plan was working to create jobs - despite predictions the unemployment rate would remain unmoved for three years - and she would "stay the course".
Treasurer Jackie Trad says her 2019-20 budget will "stay the course" amid challenging economic conditions.Credit: AAP Image/ Glenn Hunt
Despite increasing debt, Ms Trad insisted it was important to borrow to grow the economy amid challenging economic conditions internationally.
"The current levels of debt within the state of Queensland are both manageable and they are stable," she said.
"The way you reduce debt ... is you grow the economy, you grow the economy and you get more revenue in and you have less reliance on debt."
Total debt will continue to soar, hitting $90.72 billion by 2022-23, but Ms Trad insisted the state government still had a debt reduction strategy and would continue to find savings.
That total debt figure includes leases, such as office accommodation, and securities and derivatives ($7.75 billion) which must now be recognised on the balance sheet under new accounting standards.
Three expanded taxes and a compliance crack-down by Queensland Treasury were expected to raise $1.47 billion over four years.
Blaming "Canberra's cuts", including a reduction in GST revenue, Ms Trad revealed there would be an increase in land tax rates for companies and trusts of 0.25 per cent.
This change was forecast to raise $238 million over the forward estimates and apply only to land worth more than $5 million.
Land tax rates will not change for individuals.
The absentee land tax surcharge, lamented by Queenslanders who were living or travelling overseas, will increase from 1.5 to 2 per cent, and be widened to include foreign companies and trusts, but will not include Australian citizens after the backlash.
The measure is expected to raise $540 million over the forward estimates.
"The government makes these land tax changes reluctantly," Ms Trad said.
"If Canberra fixes the current bias in their GST calculations and returns what we are owed, we will repeal these land tax measures."
The government will also increase royalties, by 2.5 per cent to 12.5 per cent for petroleum, arguing the current regime had been in place since the industry began operations 10 years ago, with $476 million to be raked in over the forward estimates.
It comes after Ms Trad promised coal royalties would not be increased in the budget "in exchange" for a $70 million contribution to an infrastructure fund by the industry.
Treasury will also chase down outstanding revenue, in the areas of payroll tax, land tax, transfer duties and royalties, with the program expected to reap $220 million over four years.
There were numerous challenges facing this year's budget, including $1.3 billion in damages from natural disasters, $1.5 billion in GST reductions over the forward estimates since the MYFER estimate, and a more than $1 billion decline in stamp duties.
However, Ms Trad unveiled a $841 million net operating surplus for 2018-19, almost five times higher than the forecast of $148 million in last year's budget and $250 million more than the revised figure in the Mid Year Fiscal and Economy Review, handed down in December.
Queensland 2019-20 budget
There were also surpluses predicted across the forward estimates, while $49.5 billion will be spent on infrastructure over the next four years.
Royalties were the largest driver of growth last year, due to the continued strength in the hard coking coal price, but they were expected to decline in the future.
Royalties and land rents were estimated to have pumped $5.36 billion into Queensland's coffers in 2018-19, about $749 million higher than predicted in last year's budget.
Coal royalties alone were expected to hit $4.34 billion in 2019-20 before dropping in the following year to $3.46 billion.
The state's general government sector debt, which includes government departments, was predicted to be $38.73 billion in 2019-20.
Ms Trad said the general govermment sector's debt-to-revenue ratio, of 64 per cent for 2019-20, would remain lower than any other major state except New South Wales, as a result of the government's "careful management of borrowings".
"And it is only lower in NSW because they have chosen to privatise assets," she said.
Total debt, or that held by the "non-financial public sector" which includes government-owned corporations, was expected to be $78.72 billion in 2019-20.
Ms Trad pitched her budget as one for regional Queensland.
"Queensland is the most decentralised state in the federation," she said.
"A state that relies - more than any other - on the strength of its regional cities and towns. On the prosperity of its regional economies.
"When our regions do well, all of Queensland does well.
"And so in shaping this budget, it is regional Queenslanders who have been at the forefront of our thoughts."
It comes after Labor took a battering at last month's federal election, with no representation north of Brisbane.
General government sector expenses were expected to be $60.20 billion in 2019-20, an increase of almost $1 billion on the estimated amount spent over the past year.
Increased costs were blamed on a spike in education spending as a result of student enrolment growth, more demand for health services, extra spending on the criminal and youth justice sector, natural disaster recovery and payments to councils for the waste levy.
Total general government sector revenue was expected to be $60.39 billion in 2019-20, an increase of $319 million from last year.
The public sector will be asked to save $200 million over the next year in a measure called "reprioritisation", and $500 million every year after that, although there will be no forced redundancies.
To help the public service tighten belts, a new Service Priority Review Office will be set up from July 1 within Treasury, which will review government agencies and programs.
The Palaszczuk government has promised to keep growth in the ballooning public service to population growth and it will meet that target.
The public service will grow by 1.68 per cent over the forward estimates, compared with Queensland population growth of 1.75 per cent.
Employee expenses and superannuation were expected to cost $25.91 billion next year, about 43 per cent of total expenses.
The state government expected to hire another 4392 full-time employees, mostly in health and education.
Pokies will pour in $765 million in 2019-20, vehicle registration $1.91 billion and the waste levy $433 million.
The unemployment rate was forecast to remain stubbornly steady at 6 per cent until 2022-23, when it was expected to dip to 5.75 per cent.
"I know that there is more that we can do [on unemployment] and there is more that we are doing in this budget," Ms Trad said.
Economic growth was forecast to strengthen next financial year to 3 per cent and then drop 2.75 per cent for the next three years.
The government's electricity, rail, ports and water businesses were expected to earn $3.67 billion before interest and tax next year, a drop of more than 18 per cent on 2018-19.
Decreases in the electricity sector were blamed on forecast reductions in wholesale generation revenues and the entry of CleanCo, which were expected to increase competition and drive down prices.
Queensland will also increase the exemption threshold for payroll tax for all Queensland businesses from $1.1 million to $1.3 million, meaning an extra 1500 businesses will no longer pay any payroll tax.
To offset that cost, a higher 4.95 per cent payroll tax will be introduced for big business with taxable wages of more than $6.5 million a year, raising $544 million over four years.
Combined, the reforms to payroll tax will decrease revenue from payroll tax by $341 million over the next four years.
Regional businesses which employ 85 per cent or more local workers will receive a payroll tax discount of 1 per cent off the set rate.
The 50 per cent payroll tax rebate for apprentices and trainees, due to expire on June 30, will be extended to June 2021.
There will be a record $18.45 billion health budget and the Department of Education will get $9.95 billion.
LNP leader Deb Frecklington will deliver her budget reply speech on Thursday.
Visit Brisbane Times Facebook page from 6pm for a live chat with our state political reporter Felicity Caldwell and reporter Stuart Layt.