The glossy brochures were abound again last week as Queensland's Treasurer, Cameron Dick delivered his second budget with all the usual pomp and fanfare Queensland taxpayers have come to expect, providing an update on the state's finances as well as a glimpse of the State Government's strategy to grow the state economy over the medium term.
On the face of it, the budget numbers reflect a stroke of good fortune for the government with positive internal migration into the state, a surge in building approvals flowing from the uptake of the federal government’s HomeBuilder program, strong retail sales figures bolstered by federal government stimulus measures including the JobKeeper and JobSeeker programs as well as early superannuation releases, which together pushed the national household savings ratio to a record level of 22% in June 2020.
In navigating the myriad pages of the 2020-21 Budget, the first task is to examine the economic outlook for the state, which details the assumptions underpinning the forecasts going forward out to 2024-25.
Accordingly, the figures show that the state economy experienced a robust rebound from the recessionary impacts of the COVID-19 pandemic, growing by 3.25% over the year to June 2021 after declining by -0.7% during 2019-20, with the forecasts showing growth is anticipated to moderate to 2.75% per annum over the budget estimates.
The headline unemployment rate in the state is forecast to fall to 5% in 2024-25, which the Australian Bureau of Statistics Labour Force figures show is a level that has not been achieved in Queensland since April 2009 (acknowledging it reached 5.1% in June 2012 on a seasonally adjusted basis).
Moreover, the economic forecasts further indicate a sanguine outlook for wage and population growth, which are expected to strengthen over the projections to 2024-25 from their recent subdued levels.
The projections are also forecasting a substantial pick-up in business investment which has been in decline over the past decade and put a handbrake on economic growth in the state.
Putting budget forecasts for the level of economic growth into perspective shows that the projections of 2.75% are 0.77% greater than the average of 1.98% over the five years to 2020-21, 0.35% greater than the average of 2.4% over the past 10 years, however, they remain -1.63% lower than over the previous decade 2001-02 to 2010-11 when the economy grew on average by 4.38% per annum.
Looking at the state’s finances, the net operating balance was revised up substantially in 2020-21 to a deficit of $3.803 billion, which represents an improvement of $4.830 billion from the 2019-20 budget forecast of a $8.663 billion deficit driven predominantly by upward revisions of $2.108 billion in GST revenue and $1.577 in state taxes.
Moreover, in line with the state government’s optimism for increases to revenue over the coming years, a modest surplus of $153 million is forecast for 2024-25.
With the upward revisions to revenue, gross debt held by the General Government Sector came in at $55.079 billion in 2020-21, $6.815 billion less than was forecast in last year’s budget.
Nevertheless, when looking at the total gross public debt of Queensland Government one needs to look at the Non-Financial Public Sector as a whole to account for the debt that has been shifted onto the balance sheets of state-owned corporations.
Accordingly, total state gross debt for 2020-21 come in at $95.821 billion - an improvement of -$6.399 billion from the 2019-20 budget forecast - and will increase to $127.388 billion in 2024-25.
Revenue projections over the estimates to 2024-25 show the government is upbeat about future tax receipts, an increase in GST redistribution payments (which made up 50.2% of total revenue in 2020-21) as well as royalty and land rents from an improved outlook for coal and gas receipts.
Conversely, dividends from state-owned utilities particularly Queensland Government’s energy companies Stanwell and CS Energy, have taken a substantial hit to revenues as pointed out by Robert MacDonald in his article published by InQueensland on June 21st, which questioned whether these power companies could end up eventually costing the state billions.
Expenses for 2020-21 came in at $64.199 billion, which is $682 million (-1.1%) lower than forecast in last year’s budget, which includes a reduction in employee expenses of $189 million.
Finally, the budget outlays of $14.688 billion in the government's capital works program (i.e. infrastructure investment) for 2021-22, consisting of $12.606 billion in purchases on non-financial assets and $2.082 billion in capital grants expenses, is $147 million less than last year.
The capital works outlay as a proportion of government revenue stayed relatively steady at 23.1%, as did employee expenses also at 43.2%.