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Queensland Economic Advocacy Solutions

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Queensland Budget 2019-20 Business Update

This budget has been labelled as a big borrowing, a big spending and a big taxing budget.  It is certainly all of those three things.
 
It is not an election budget but it is 100% a budget that is squarely designed to sure up support following significant concern by the State Government over the recent Federal Election wipe out north of Brisbane for Queensland Labor.  This is the context to bear in mind in its framing.
 
Key points to highlight include:
 
Economic growth for 2019-20 will be 3.0%, revised up from 2.75% at the mid-year fiscal and economic review (MYFER), which is good news.  However a hefty portion of this growth will rely on exports and domestic economic activity will be subdued. Employment will continue to grow but at 1.25% compared to MYFER’s estimate of 1.75%.
 
There is a surplus of $841 million in 2018-19 which is $317 million higher than at the MYFER in December. The surplus of $189 million for 2019-20 is broadly in line with the MYFER estimate of $193 million. Surpluses are forecast across the forward estimates.
 
Total Government plus Government Owned Corporations (GOCs) debt is rising across forward estimates. The debt to revenue ratio is increasing from 105.5% ($71.4b) in 2018-19 to 122.5% in 2022-23 ($90.7b). This contrasts with NSW (85%) and VIC (76%) the two AAA rated states. Queensland would need to pay-off approximately $11 billion in debt to get our AAA credit rating back.
 
The infrastructure spend of $49.5 billion across the next four years and $12.9 billion in 2019-20 will support jobs. However infrastructure spend as a percent of GSP at the MYFER for 2019-20 was 2.9% and it will now only be 2.7%. This will hover between 2.6% to 2.7% for the next several years well under the longer term trend. 
 
The flagship business policy in this State Budget is lifting the payroll tax exemption from $1.1 million to $1.3 million for all businesses and a special 3.75% payroll tax rate for regional Queensland businesses (normally 4.75%). This will drive growth & employment. However it is offset by businesses with a payroll above $6.5 million now required to pay 4.95% payroll tax (up from 4.75%).  13,000 business benefit from lower payroll tax and 6,000 lose out from higher payroll tax.
 
Tax revenue in 2019-20 will increase by 8.3% the highest growth since 2013-14. Over the next four years: payroll tax winners save $885 million; payroll tax losers pay an additional $544 million; some property owners through increased land tax will pay collectively another $778 million and the petroleum industry will pay another $476 million (see below for further details).
 
These proceeds are undoubtedly being utilised to fund the infrastructure budget and the continuing increase in public service headcount (up from 229,246 in 2018-19 to 233,637 in 2019-20) to improve hopefully frontline service delivery.  

In closing, the Budget cements what the State Government does well - spending and I don't mean this negatively. It hand on the heart believes this is in the best interests of our economy when nationally and globally things are slowing.  The State Government is taking an approach of priming the Queensland economy through expenditure on infrastructure and frontline services.  However, in doing so, it is also making a controversial call of singling out big business through higher payroll tax, the petroleum industry and higher end land owners to cover the bill.  

These sectors are also key elements of our economy.  It is a gamble of sorts - that the diminished economic activity from these three sectors as a result o these higher taxes will be more than made up by an economy wide Government spending spree.  This is a gamble I would not make and a safer option would be to find a way to make frontline service delivery improve without throwing additional public servants at the problem.

QEAS Business Update: State Budget Special available here

QEAS presentation to the QMCA Breakfast available here 

 

 

 

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