State expects two more years in the red

QUEENSLAND Treasurer Andrew Fraser has ruled out restoring the state budget to surplus before the Bligh government goes to the polls in two years.

QUEENSLAND Treasurer Andrew Fraser has ruled out restoring the state budget to surplus before the Bligh government goes to the polls in two years.

Previewing the budget he will hand down tomorrow, his third, Mr Fraser warned that the once-powerhouse accounts of the Queensland government would remain in the red for the duration of the period covered by Treasury projections.

"The budget will be in deficit across the forward estimates," he said yesterday, applying final touches to the budget and his speech to parliament.

"We have put in place a charter that has a goal of achieving a surplus by 2015-16 and we will report on that in the budget on Tuesday."

But debt levels that triggered a downgrading of Queensland's triple-A credit rating last year have been pared back, with state debt for 2009-10 coming in at $51.6 billion, $6bn below the forecast amount.

Mr Fraser said the 2010-11 budget would show debt consistent with restoration of the top-tier credit rating after completion of the state's controversial $15bn assets sale program.

With the government struggling in the polls, Mr Fraser and his boss, Premier Anna Bligh, want the triple-A rating back well ahead of the state election due by early 2012.

But in an interview with The Australian, Mr Fraser warned that a sustainable recovery was far from guaranteed for Queensland, and jitters in the mining sector over the federal government's resource super-profits tax would not help.

"Our economic recovery is very much export-led. It's very much business investment, which is really a proxy at this point for resource investment," Mr Fraser said.

"That means that obviously issues around the RSPT are critical for us because growth isn't coming back out of households -- and while interest rates are going up that's unlikely to be the case -- it's got to be about global demand lifting and businesses and exports coming back.

"All of that underscores that the recovery for us is far from an easy thing."

With a big capital works spend required to deal with population growth, state debt would rise to $83.5bn in 2013-14 in the budget forward estimates.

However, Mr Fraser stressed that this did not take into account the proceeds of assets sales, including Queensland Rail's freight and coal hauling business and the Port of Brisbane.

Despite predictions of a smaller property tax take this year, Mr Fraser said the state's struggling housing market had returned to growth -- albeit marginal -- sooner than expected.

At a media briefing yesterday, he said the bottom line had been hit by a blowout in costs associated with this year's record summer floods, which put four-fifths of the state under water.

The budget had had to absorb $1.4bn in costs over this financial year and next, four times the usual allocation for natural disasters.