1 hour ago
1
Queensland is expected to post a more than $1 billion boost in tax revenue from higher-than-forecast coal and house prices, but the treasurer has played down the likelihood Tuesday’s budget will flag a surplus in the coming four years as enormous expenses heap pressure on state debt.
David Janetzki’s promised fiscal stability under a Liberal National government will butt against a need to borrow money to pay for the costly Olympics infrastructure as well as grappling with ballooning public sector wages.
Queensland’s current debt projection is forecast to spiral to nearly $205 billion by mid-2029, with a dreaded credit rating downgrade from ratings agencies likely if ongoing expenses continue to soar.
In a pre-budget interview with this masthead, Janetzki was tight-lipped about the line items in his second budget as treasurer but insisted there would be savings over the coming years in capital expenditure (capex) through workforce productivity after the government ditched entitlements crafted by the CFMEU.
“There are levers that we can pull because the more productive the building construction sector is [means] for every dollar we’re getting more road, we’re getting more hospitals, more schools, more social and community housing,” he said.
“That’s the best thing we can do to make sure capex dollars is spent most productively.”
But independent economic think tank e61 Institute said the ongoing build of the Cross River Rail train tunnel project combined with the imminent ramping up of 2032 Games infrastructure will create a “construction-capacity crunch unlike anything seen at the state level”.
Its chief executive, former federal Productivity Commission chair Michael Brennan, said capital spending as a share of the economy was now exceeding NSW’s infrastructure program at its peak.
He noted only a third of Queensland’s capital program is currently funded from cashflow, meaning it’s borrowing heavily to build at a time when interest costs are rising, while the tight deadline for the Olympics as well as competing major projects across the country meant cost blowouts were likely.
Over recent years, lower coal prices resulted in less revenue pocketed by the state from royalties, but conflict in Iran combined with Chinese mining disasters triggered a spike in the commodity.
Coking coal has been running at an average of about $US210 per tonne compared with last year’s budget assumption of $US192. This masthead was told each 1 per cent variation results in a revenue change of about $100 million – meaning the higher price will deliver an additional boost of nearly $1 billion this year alone.
House prices have also been stronger over the financial year than predicted, which will also deliver a jump in stamp duty revenue for the state. But economists expect windfalls from transfer duties to be downgraded in the coming year with property prices likely to fall due to the federal government’s changes to negative gearing and capital gains tax.
Brennan warned there was greater volatility in Queensland’s revenue base than has existed previously, which presents a challenge as the state seeks to demonstrate to rating agencies it was controlling recurrent spending.
“Something’s got to give,” he told this masthead.
“At the moment, at least as outlined in the December mid-year fiscal and economic report, there was no stabilisation in that [debt-to-revenue] ratio. Certainly, no reduction, which – and that’s what that principle calls for, is a reduction in that ratio over the long term”.
Victoria’s ratio had stabilised with debt levels about 200 per cent higher than its annual revenue. In Queensland, the figure is still rising – currently to about 170 per cent.
“I think that underscores that there is a need to have some years of relatively modest recurrent spending growth,” he said.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
