The 2012-13 Queensland budget was the most anticipated policy announcement in several decades.
The cut-backs in public sector employment previously forecast and cost saving measures announced in the early months of the new government foreshadowed further austerity.
The big question was whether the Newman Government cut-backs would affect front-line services and the roll-out of much needed infrastructure.
The Government has made clear the priority is to two medium-term objectives; to stabilise the recent blow-out in budget deficits; and begin the process of winding back state debt which in 2012-13 will reach $74 billion, rising to an $83 billion peak in 2015-16.
The Government believes that it can return the budget to surplus within three years and reduce liabilities to revenue from 130 to 112%.
This will be achieved with several new revenue measures including an increase in mining royalties and gambling taxes. However, a feature of this budget has been the balance that the Campbell Newman Government has struck between its short-term economic and social objectives.
Queenslanders will benefit from a freeze on government charges including public transport, energy and private vehicle registration fees, stamp duty on housing purchases and increased spending in health, education and the police.
The Government also announced increased spending on critical regional infrastructure including roads, ports and community facilities, it will boost funding for regional development the focus of which in recent years has been the southeast of the state.
Other important initiatives include increased spending on an upgrade of the Bruce Highway and support for the construction industry across a number of measures, including an increase in the first home buyer’s grant and a significant rise in funding for affordable housing.
The budget measure most likely to be the more controversial is the continued wind-back in state government employees with an $800 million provision for redundancies. This will impact regional centres although the Newman Government is predicting growth of 4% in gross state product in the coming year.
The growth estimate doesn’t tell the full story of the Queensland economy which is experiencing weaknesses in the tourism, retail, service and wholesale sectors and the shut-down of the smaller Queensland resources projects in the face of softening commodity prices.
The initiative most likely to impact the budget in the next 12 months will be the Commonwealth’s response to the increased mining royalties. The Commonwealth has threatened cut-backs in payments to the states that increase royalties. This is because of the impact on the mineral resource rent tax (MRRT) to the Commonwealth budget in 2013-14.
The Newman Government has increased royalties on coal producers subject to the MRRT and introduced a royalty payment structure referenced to the price of coal. The royalty payment is taken into account in the calculation of the MRRT and is unlikely to directly affect the mining companies future investment in new projects.
A further initiative of the budget is the Newman Government’s commitment to ease the regulatory burden on Queensland business by offering a collaborative approach to cutting red tape and reducing transaction costs.
The Newman Government’s first budget indicates that the LNP is willing to downsize government in the short-term to achieve a balanced budget and reduce state debt.
This Government has indicated for some months that this would be austerity budget. It believes that this is necessary if the state is to win back its AAA credit rating, reduce the cost of borrowings and raise private investment in capital-intensive sectors of the state economy.
The budget attempts to achieve this at the same time that it promotes regional development and delivers on its social agenda in areas such as indigenous welfare, reducing the waiting list for affordable and social housing and relief for householders feeling the effect of rising electricity charges in a State where there is a surplus of generating capacity.
The indications are that there will be significant economic and social reforms to follow.