Earlier today [June 11, 2019] Queensland Treasurer and Deputy Premier Jackie Trad handed down Queensland’s State Budget for 2019-2020. Here are the highlights.
The budget outlines the Government’s economic plan to help create jobs across all regions of the State through an enhanced focus on:
- supporting businesses and business-led growth
- delivering sustainable investment in productive infrastructure and essential services
- fostering the next wave of innovation and investing in ideas, and
- investing in skills and training for current and future generations of Queenslanders.
Queensland’s economic forecasts (Source: Budget Overview)
A general government net operating surplus of A$841 million is expected for 2018-19, almost A$700 million higher than forecast in the 2018-19 Budget (A$317 million more than the 2018-19 Mid Year Fiscal and Economic Review estimate). Beyond 2018-19, the Government describes the fiscal environment as “challenging”, with the surplus for 2019-20 dropping to a forecast A$189 million.
Queensland’s 2.75 per cent forecast growth in gross state product (GSP) in 2018-19 is expected to outpace forecast national gross domestic product (GDP) growth of 2.25 per cent. For 2019-20, the government is forecasting the State’s economy will grow 3 per cent, before dropping to 2.75 per cent for each year until 2022-23.
The economy has benefitted from 13 of consecutive months of record annual export totals, with exports for the 12 months to April 2019 topping A$85 billion. The top two export commodities in total export value were metallurgical coal (A$37.4 billion) and liquefied natural gas (LNG, A$15.2 billion).
The 2019-20 Budget forecasts continuing strong growth for the coming financial year, with GSP forecast to grow by 3 per cent but falling back to 2.75 per cent in the out years due to weakened global conditions.
Queensland’s revenues have also suffered from the impact of the Commonwealth’s GST reductions since the Mid Year Fiscal and Economic Review (MYFER), losing some A$1.5 billion over the forward estimates.
This is in addition to the budget impact of natural disasters which occurred in the 2018-19 year, with a total cost of A$1.3 billion over the forward estimates.
Similar to the other states, Queensland has not been immune to the more “subdued” activity in the housing market. Transfer duties have been revised down by A$1 billion since the MYFER over the forward estimates period.
A new Australian accounting standard, AASB 16 Leases, has been adopted in the 2019-20 State Budget. AASB 16 applies to all government and private sector reporting entities.
Under AASB 16, operating leases that previously were not recognised on balance sheet will now be included as lease liabilities and lease assets on the State’s balance sheet. This change in reporting results in a one-off increase to general government sector borrowing of over A$2.2 billion and an increase for Non-financial Public Sector (NFPS) borrowing of over A$2.6 billion, on 1 July 2019.
Key government expenses (Source: Budget Paper No. 5)
Expenses for 2018-19 are estimated to be A$59.226 billion, an increase of A$2.891 billion from 2017-18. The increase is due to growth funding to support ongoing demand for health services (around A$1.5 billion) and education services (around A$600 million).
In 2019-20, health and education together constitute approximately 56.1 per cent of general government sector expenses.
The operating expense component of natural disaster-related expenses in 2018-19 is around A$500 million.
Total expenses are projected to grow at an average annual rate of 2.3 per cent over the four years to 2022-23. From 2020-21, revenues commence growing at a faster rate than expenses, with the gap widening across the remainder of the forward estimates.
In 2019-20, general government sector expenses are estimated to be A$60.198 billion, an expected increase of A$972 million over the estimated actual for 2018-19.
A Service Priority Review Office (the Office) will be established in Queensland Treasury. In partnership with the Department of the Premier and Cabinet, the Office will drive the realisation of reprioritisation targets of A$200 million in 2019-20 and A$500 million a year from 2020-21, by conducting reviews of Queensland public sector agencies and existing programs.
Business, investment and taxation (Source: Budget Paper No. 4)
In a move that will ultimately be welcomed by businesses across the State, the government proposes to cut payroll taxes from 1 July 2019. From July, the exemption threshold for payroll tax will be increased for all Queensland businesses from A$1.1 million to A$1.3 million.
Regional businesses that employ 85 per cent or more local workers will also receive a payroll tax discount of 1 per cent off the set rate.
The combined payroll tax threshold increase and the regional discount will mean an estimated 13,000 businesses are better off.
Further, the 50 per cent payroll tax rebate for apprentices and trainees – that was due to expire on June 30 – will be extended to June 2021.
The Treasurer also took a swipe at the federal government and the fact that “Queensland’s share of the GST has been slashed by A$866 million as a direct result of interference by Canberra”. This reduction in GST revenues is blamed for the need for an increase in land tax rates for companies and trusts of 0.25 per cent on holdings over the value of A$5 million.
Individual investors will be relieved to see there is no change to land tax rates for individuals.
The government will also bring the land tax absentee surcharge adjustment in line with New South Wales and Victoria – increasing the surcharge from 1.5 per cent to 2 per cent, along with a widening of the definition to include foreign companies and foreign trusts.
The government announced it intends to review royalty arrangements with a view to levelling the playing field and also increase royalties overall by 2.5 per cent – to 12.5 per cent for petroleum from the 2019-2020 financial year.
Climate change initiatives
The Treasurer acknowledged the importance of acting to address climate change, and outlined a range of initiatives the government is taking. For example, next financial year, the Government’s renewable and low-emissions electricity generator – CleanCo – will begin operating and trading in the national electricity market. It will assist in the provision of a cleaner, more affordable, sustainable and secure energy supply for Queensland. It will also, alongside the Government’s existing generation businesses, play a key role in the Government’s commitment to generate 50 per cent of the state’s energy from renewable sources by 2030.
For more information
Queensland Budget 2019-20
Interactive budget by regions map