2019-20 Queensland State Budget

2019-20 Queensland State Budget

Small, medium and regional business the big winners

June 11, 2019
Regional Queenslanders flexed their muscle at the Federal Election ballot boxes and their voice has been heard loud and clear by the Palaszczuk Government with today’s release of a State Budget for the regions.
A $324m payroll tax discount package for businesses operating in regional Queensland is the major headline, coupled with a $335m state-wide payroll tax-free threshold increase for small and medium business.
Underscoring the importance of Queensland’s regional centres, gas and coal royalties have surged upward again (forecast at $5.62B for 2019-20) and Queensland exported a record $85.2B in goods, with 80% leaving from regional Queensland ports over 2018-19.
On the downside, Queensland is bearing the brunt of Canberra’s changes to GST distributions. It is the only state in Australia where its share of the GST is going down, not up. 

The numbers

  • Surplus forecast of $189m for 2019-20
  • 3% GSP growth forecast for 2019-20
  • General Government borrowings 2019-20 – $32.8B
  • Non-Financial Public Sector borrowings 2019-20 – $71.97B
  • Regional unemployment down from 8% in 2016 to 6.5%
  • The gap between the unemployment rate in regional Queensland and SEQ is now 0.7%. This is down from a high of 2.5% in 2016
  • Overall state unemployment forecast to remain relatively steady at 6%

Debt position

There will be plenty of media coverage tomorrow about Queensland’s debt problem, but ‘borrowing to build’ is now a common theme across all state and federal budgets as the economy continues to weaken and infrastructure demands increase.
The cost of servicing Queensland’s debt (interest payments) has come down to 2.9 cents for every $100 of revenue, putting Queensland well below the national average. The familiar conservatism of Queensland Treasury’s revenue projections ($7.5B over the past three budgets) continues to provide a buffer for operating surpluses.
That’s the ‘yellow hat’ news on debt, the ‘black hat’ perspective requires a look over the horizon to seek a pathway back to the prized AAA+ credit rating.
That would almost certainly require structural changes of some kind to the state’s balance sheet, all of which are likely to be politically difficult including: asset sales, Government Department restructuring, property and land sales, lower capital spends etc.
As it stands, it’s unlikely the Palaszczuk Government will need to (or want to) address any type of balance sheet overhaul before next year’s October 2020 election, but the challenge awaits whoever holds office in 1 William Street for the four years after that.

The Winners

  • Small and medium businesses with a payroll up to $4.5m, will get a new, higher payroll tax-free threshold of $1.3m
  • Regional Queensland businesses get a new payroll tax rate discount of 1% (which is up to 20% lower than the current rate)
  • Businesses that are growing will be eligible for payroll tax rebates up to $20,000 for growing the total number of employees
  • Coal miners – no change to coal royalties, which likely wouldn’t have been the case, but for the Federal Election outcome
  • The construction and infrastructure sector, with a continuing focus on building infrastructure to stimulate jobs growth and private investment
  • Users of the Mt Isa to Townsville rail line (Glencore, Incitec Pivot and other minerals) who will get reduced access charges and benefit from upgrades to Townsville Port.

The Losers

  • All Queenslanders have been impacted by changes to GST distribution methodology.  Queensland is the only state in Australia where the level of GST funding is going down.
  • Large companies with a payroll over $6.5m – 0.2% increase in their payroll tax rate
  • Companies with large land holdings over $5m – 0.25% increase in the Land Tax rate
  • Gas companies – 2.5% increase in the Petroleum Royalty rate
  • Foreign companies – will be captured by the Land Tax Absentee Surcharge and the surcharge will increase by 0.5%
  • Hollow logs and redundant programs hidden away in departmental bureaucracies, which will have a new Savings Priority Review Office trying to find them.

Where to from here

Find more revenue and make genuine savings! They’re the two big tasks as the Palaszczuk Government heads toward the polls in October 2020. 
It’s unlikely the Deputy Premier is going to get much joy out of Canberra on GST, so expect the Government to ‘pin its ears back’ on mining, gas and other minerals approvals over the next 15 months.
On the savings side, it will be interesting to see how much authority the newly established Savings Priority Review Office is given. No doubt there are plenty of outdated and costly programs running in deep dark places of the various Government Departments but finding them and taking the funding as savings is easier said than done.   

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