Queensland debt to climb as coal prices drop

The drop in royalty revenue will force the state government to ­borrow more to fund its $96.2bn infrastructure project.

Queensland Deputy Premier Cameron Dick. Picture: Tertius Pickard

Queensland’s Auditor-General has warned that state debt will surge in the next four years as revenue from Labor’s tax hike on coalmining giants plummets.

The 2022 introduction of three new tiers of ­royalty rates on soaring worldwide coal prices delivered an ­extraordinary turnaround in the state’s finances last year, ­funnelling $15bn into government coffers and producing the biggest state budget surplus in history.

The huge royalty windfalls will taper off as coal prices normalise, with state revenue forecast to fall by $4bn this year, Auditor-General Brendan Worrall wrote in a report tabled in parliament.

“This will result in a substantial decline in royalties over the next four years, including a 37 per cent decline in 2023–24 and a further 45 per cent decline in 2024–25,” he wrote.

“So as revenue from royalties reduces and debt is used for ­significant government initiatives, net debt is expected to ­increase.”

The drop in royalty revenue will force the government to ­borrow more to fund its $96.2bn infrastructure project, including new renewable energy projects, public housing and hospital ­expansions.

In the mid-year budget ­update, delivered by Treasurer Cameron Dick in December, the state’s projected total debt for 2026-27 soared by more than $2bn in the six months since the June budget, from $147.02bn to $149.14bn.

On the government’s preferred measure of net debt, which excludes publicly owned companies, borrowings are forecast to reach $47.34bn by mid-2027, driving the debt-­revenue ratio from 7 per cent to 55 per cent in four years.

Mr Worrall said while Queensland’s net debt to revenue ratio was expected to increase over the next four years, it would remain “below the levels in NSW and Victoria”.

“This result is driven by the budgeted increase in borrowings under the capital program and a reduction in revenue in 2023–24 as coal prices normalise,” Mr Worrall said.

Interest payments on the Queensland government’s debt bill are expected to jump to $1.9bn this year, an increase of 17 per cent on the previous year.