Maroon state deeper in the red despite tax hikes

The pitch from Premier Annastacia Palaszczuk and Treasurer Jackie Trad was peppered with upbeat references to regional infrastructure, job creation and services. But the first question in the Queensland budget lockup press conference called out the elephant in the room: “Have you given up on debt?” They are yet to answer it. The D-word was barely broached in Ms Trad’s budget speech or in the glossy PR kit. The budget papers told the story. Total borrowings are forecast to rise every year in the forward estimates to $82.9 billion in 2022-23. On the basis of previous accounting standards, number crunchers say the real figure would be at least $88bn by 2022-23. Ms Trad tried to dodge that, preferring to discuss Queensland’s decreasing debt-to-revenue ratio (down from 91 per cent seven years ago to 64 per cent in 2019-20) and growth as the pain-free panacea to debt, rather than actually paying it off. “We choose not to cut, sack and sell” is the mantra. The problem is the interest bill: $3.2bn this financial year, set to rise to $3.35bn in 2022-23. The drain on taxpayers, worth about two new hospitals or eight new schools a year, will soar if interest rates do. The state’s AAA credit rating has long faded into the mists of time.

Yesterday’s budget had plenty of growth. The state’s public service wages bill is projected to grow by 5.4 per cent in the coming year, more than four times inflation. Employee and superannuation expenses account for almost half of the state government’s operating expenses. Companies face growing land tax bills and, in many cases, growing payroll tax bills. While purporting to encourage growth and jobs, it was disconcerting to see Queensland Labor putting Bill Shorten’s discredited playbook for hitting the “big end of town” into practice. Ms Trad’s spin about “payroll tax relief” did not disguise the increase in payroll tax for companies with annual wages bills above $6.5 million — that is, the state’s largest 6000 private sector employers. That retrograde tax grab will be offset by an increase in the payroll exemption threshold that will help 1500 small and medium firms.

Coal is also delivering, with increased royalties on the back of higher prices boosting this year’s operating surplus. One of the most serious problems in the budget was the announcement of a 25 per cent hike in royalties from the lucrative liquefied natural gas industry. That move, made after negligible consultation with an industry that is crucial to Australia’s energy future and exports, has drawn the wrath, understandably, of Martin Ferguson, who was Labor’s resources and energy minister in the Rudd and Gillard governments and a former ACTU president. The measure could deter vital investment. Mr Ferguson, who chairs the advisory board of the Australian Petroleum Production and Exploration Association, has warned Queensland Labor that the move could trigger a reaction reminiscent of the 2010 anti-mining tax campaign.

For the sake of $476m in extra revenue over four years, the state should consider the implications. The budget’s regional infrastructure theme showed state Labor has learned from the drubbing voters handed its federal colleagues on May 18, when the party received 26.7 per cent of the primary vote in Queensland and won no seats in the centre or north. Major road projects in Cairns, Mackay, Rockhampton and the Sunshine Coast, upgrading the Port of Townsville, finishing the Townsville stadium and upgrading Gladstone’s coal terminal showed admirable appreciation of regional needs. So did major investments in the Sunshine Coast, Kingaroy and Roma hospitals, extending the Gold Coast Light Rail and four new schools to be built in Gold and Sunshine Coast growth areas. Tourism, which is thriving, will be boosted with investments in Great Barrier Reef island resorts, the outback and Cape York. Infrastructure projects have been well targeted and will boost regional communities and economic activity across Australia’s most decentralised state. Labor also deserves credit for the fact that under its watch the gap between unemployment in the regions and southeast Queensland has narrowed from 2.5 to 0.7 per cent. Ms Palaszczuk and Ms Trad, however, remain tightly wedded to Labor’s big-taxing, big-spending approach. While they remain so, Queensland will fail to reach its enormous potential.