QLD BUDGET 08/09: Budget for the 'toughest circumstances

By: laura warne


Treasurer Andrew Fraser’s first Budget will see the Queensland Government record a deficit of nearly $1 billion in 2007/08 in

Treasurer Andrew Fraser’s first Budget will see the Queensland Government record a deficit of nearly $1 billion in 2007/08 in what Premier Anna Bligh described as a Budget drafted "in the toughest circumstances".

That deficit will bounce back into the black in 2008/09 based in large part on changes to the coal royalty revenue scheme, which will recoup nearly $600 million from resource companies next year.

The Budget introduces measures aimed at improving housing affordability as well as a $3 billion increase in infrastructure spending.

While it aims to improve the ability of potential home owners to enter the market as well as assisting small business through payroll tax reform, many of the initiatives will be paid for by mid to large-sized companies through changes to transfer duties.

"We have framed this Budget against challenging times," Fraser told Parliament today.

"An unprecedented credit crunch hit global finances as the fall out from the US sub-prime mortgage crisis washed around the world."

Despite this, Queensland’s economy is forecast to continue to outpace the national economy, largely on the back of coal exports, with estimated growth of 3.75 percent in 2007/08 increasing to 4.25 percent in 2008/09.

"This will be the thirteenth year we have outpaced the national rate of economic growth," Fraser says.

"While jobs growth slows nationally, our economy is set to deliver a year average rate of unemployment that is the lowest in a generation."

Business investment in Queensland is forecast to grow by 9.25 percent.

Payroll reform

The Government will extend the current phase-out of the payroll tax deduction in a move expected to assist nearly 7,000 businesses. Currently the $1 million deduction phases out at $4 million.

The new measure will extend the phase-out to $5 million, delivering payroll tax cuts to eligible small and medium-sized businesses with payrolls between $1 million and $5 million. This will cost the Government $20 million in 2008/09.

Tax revenue

However, payroll revenue will increase by some $220 million to $2.7 billion in 2008/09 on the back of continued strong employment.

Tax revenue will increase by 5.8 percent in the next financial year, including an extra $171 million in transfer duty, $38 million in vehicle registration and $17 million in insurance duty.

The Government will lose around $320 million based on its commitment through the inter-governmental agreement on GST to abolishing mortgage duty. It has, however, brought forward its axing to July 1 this year from January 2009.

Increased royalties from resources will amount to $594 million in 2008/09, reducing to $318 million in 2011/12.

The Government will also reap some $74.6 million in 2008/09 in transfer duty.

The revised structure will result in a reduction in duty payable for all homes valued up to $590,000.

Houses valued at $2 million will attract an increased duty of $7,500.

The Government says the changes will result in beneficial or no change for 90 percent of all transactions.

Deficit

The Budget is forecast to bounce back into the black by 2008/09 on the back of increased coal royalty revenue, reflecting an increase in the value of coal and a change in the royalty rate.

The forecast Budget surpluses, however, are expected to reduce significantly over the coming years based on abolishing mortgage duty, and slower growth in GST receipts.

Infrastructure

An increase in input costs has forced the Government to increase its infrastructure funding to $17 billion in 2008/09.

The majority of big ticket items are already under way, however, the increased costs will see the Government run a cash deficit of over $3.5 billion in 2007/08, down from a $2.3 billion surplus in 2006/07.

The deficit is $1 billion more than anticipated in the December mid-year financial review.

"That larger than expected cash deficit is predominantly the result of the case impact of the downward revision to investment returns from 7.5 percent to 2 percent," according to Budget papers.

Environmental fees

The Government is pushing ahead with plans to amend its licensing structure to force companies undertaking environmentally relevant activities to pay for monitoring by the Environmental Protection Agency.

The Government will introduce a new ‘risk-based fee structure’ for ERAs as part of an expanded state-wide compliance program.

This will cost businesses $12.7 million in 2008/09, increasing to $26.4 million by 2011/12.

"The expanded program will enhance investigation and monitoring activities and will provide industry with a higher level of environmental service," according Budget papers.

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