Queensland goes into deficit to fund infrastructure

Queensland Government plans to run budget deficits to fund infrastructure projects amid a decline in revenue

The Queensland Government plans to run a budget deficit the next two years as it commits to funding infrastructure projects amid a decline in revenue.

Treasurer Andrew Fraser has pledged to forego surpluses the next two years to maintain the economy by investing heavily in capital works and employment opportunities.

He says the mid-year economic review, to be released next week, will hand down a deficit next financial year, with the expectation another deficit will follow the year after.

Fraser says the review will show a drop of $1.3 billion in GST revenue across the forward estimates combined with a $3 billion loss in net state taxes and royalties.

"That’s $4.3 billion wiped off future revenues across the budget’s forecasts," Fraser says.

Furthermore, he says the Government has revised down its forecast for transfer duty, which is expected to be more than 25 percent below this financial year.

"Our budgeted surplus of $809 million faces being completely wiped out," Fraser says.

But he claims the Government’s decision to borrow funds will give it a "pathway out of deficit" because infrastructure investment will pay off in the medium to long term.

"The bottom line is this: we must sustain spending and infrastructure investment to support jobs and activity. It’s the right thing to do in the short-term for our economy," Fraser says.

However, he warned of "unpopular decisions" in the next two years, saying 2009 will be a tough year as many people confront an economic downturn on the scale not seen for generations.

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