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Queensland Labor budget forecasts surplus despite falling mining royalties Queensland budget raids super funds to pay for social services spending
(about 1 hour later)
Queensland is forecast to achieve its biggest operating surplus in nearly a decade despite significant declines in projected mining royalties. The Palaszczuk government has used its first budget to lift spending on key social services in Queensland that have traditionally lagged the national average.
Treasurer Curtis Pitt has unveiled a positive state budget that’s predicting a $1.2bn surplus this financial year – the state’s largest since 2006/07. The state made a $962m operating surplus in 2014/15. Labor, which eschewed the former Newman government’s plan to sell power and port assets to pay down the state’s total $80bn debt, will instead partly rely on an accounting manoeuvre using the surplus from a public servants’ superannuation fund to underpin the spending increase.
Queensland is expected to continue to earn more than it will spend with surpluses exceeding $2bn in 2016/17 and in 2017/18 despite forecasts of significant write-downs in royalty revenue and payroll tax revenue. Overall revenue growth is projected to be 3.2% this financial year, almost half of the 6.1% in 2014/15.
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Steep falls in coal and oil prices have contributed to a $3.2bn write-down in royalties since the mid-year economic review. The decline in mining investment has contributed to a $396m write-down in payroll tax revenue. It includes a record $14.2bn on health in 2015-16, which translates to an annual increase of $80 to $2,934 per capita, just above the national average.
However, Pitt says an increase in LNG exports and a measured approach to balancing the books will drive the bigger surpluses. Queensland has traditionally spent less than most other states in social services per capita, despite the commonwealth grants commission recommending it exceed the national average to meet the needs of a widely dispersed population.
“We will see significant pick up in LNG royalties even though the revenue write-downs are about $3bn across the forward estimates,” he said. “We are experiencing a downturn in commodity prices but also through the price of oil which is affecting LNG.” The government will also increase education spending to $9bn or $1,863 per capita, an increase of $110 per person from 2014-15. Spending on emergency services and police per head of population will remain flat at $134 and $431 respectively.
He said while there was less demand from China for coal, India’s appetite for thermal coal was on the rise. The state’s economic growth is forecast to rise from two per cent to 4.5% in 2015/16. Pitt said this was stronger growth than any other state in the country. Treasurer Curtis Pitt said Labor was “rebuild(ing) essential services which were neglected under the previous government”.
“We are restoring funding taken away from very important areas like health and education and training. This was an area that was being severely undercut by the (Liberal National party),” he said.
“Labor’s priorities are different to the LNP. They were all about trying to support bankers and trying to sell off assets to support their private sector mates. What Labor is about is delivering jobs, delivering skills and training and delivering basic health and education services for Queenslanders. It’s a very different approach to government.”
Labor has scrapped its election plan to pay down government debt – which including government-owned corporations amounts to $80bn, the highest in the country – using dividends from its power utilities.
Instead, it will pay down what it calls “general government debt” by shifting $4bn in debt to those utilities, arguing that brings their gearing into line with private industry standards and will “make them work harder for the people of Queensland”. Pitt on Monday was forced to reject suggestions this amounted to assets sales by another name.
The government will repay another $2bn in debt that would it would otherwise have put over five years into its employees superannuation fund, which it says has $10bn more than necessary to meet current liabilities. It will use another $3.4bn that would have gone to a central fund for employee long service leave payments, which instead will be “met when claimed”.
Pitt said these savings showed the former goverment’s plan to cut debt by selling off income producing assets was a “lazy approach to lazy balance sheets”.
The budget forecasts an operating surplus of $1.2bn in 2014-15, the state’s biggest in nearly a decade. That relies on the Queensland economy growing at a nation-high rate of 4.5% as government spending itself grows 4%.
Pitt said forecast unemployment at 6% was still “too high” and would be “one of enduring challenges” of the Palaszczuk government’s first term.
Rod Campbell, research director at progressive think-tank the Australia Institute, said the government’s first budget showed social spending that better reflected a growing population.
The spending boost on health would “push Queensland a little above the national average, which is where it should be according to the Commonwealth grants commission”.
“I think that’s getting up towards what Queensland should be spending on a per capita basis on health,” he said.
“I think Queensland, despite a small increase, is still a little below the national average on education.”
“But in general, spending is keeping track with population growth a little bit better.”