Queensland Budget 2010

“Twelve months ago, this Government took the decision to fight for jobs, above all else.” These were the words Queensland Treasurer Andrew Fraser began his 2010 budget address with. Fraser is a hard-working and earnest young man but I wonder if it crossed his mind that others might wonder if the jobs they fought hardest for were their own. The Anna Bligh government has been on the nose for twelve months or more and the latest Galaxy poll in the Courier-Mail on Monday showed a 55-45 lead to the LNP on a 2PP basis.

On Monday Fraser claimed he would not be distracted by the poll and in his budget speech he recommitted the Government to what he called its “true task, providing Queenslanders with a chance at the dignity of work.” Given that the unemployment rate in Queensland is 5.6 percent, Fraser may be taking a gamble in his “first commitment” which does not address the other 94.4 percent of adult Queenslanders who either have jobs or who are not registered with Centrelink.

But Fraser did have good economic data to report. He spoke of a better than expected growth rate of 3 percent which was still “below trend” but was better than the national 2 percent rate. The recession-busting construction spree represented 7 percent of the State economy and 120,000 jobs with a predicted 2.75 percent increase in 2010-11. They will continue to pour money into infrastructure promising $17.1 billion this financial year though disappointingly, roads still get the lion’s share of the funds.

The State deficit has been reduced to $287 million which is well down on the $2.3 billion Mid Year forecast and a measure of how the resources boom has contributed to state coffers. Fraser said they are on target to deliver “a solid surplus” by 2015-2016 but the revised estimates suggest it will be happen a lot sooner than that.

Despite his money worries, Fraser still has the ability to dish it out to various constituencies. Pensioners do well as usual, a form of largesse that governments may need to reconsider as the country gets older over the next 20-30 years. Fraser gave them another $90 million 50 percent concession on Compulsory Third Party insurance and an increased electricity rebate worth $50 million. As worthy as these sound, I wish governments became more creative with their grants by either supporting a move towards the consumption of renewable energies and providing incentives to use more public transport instead of subsiding private vehicle use.

There are some sops to environmental concerns. There is $60 million for the popular Solar Bonus Scheme (which 22,000 people have signed up to already) $35 million for the Kogan Creek solar boost project (matching a similar amount from the Federal Government) to install a solar thermal addition to increase its capacity by 44 megawatts at peak solar conditions and improve plant efficiency.

The budget also has $300 million for education and training including funding for up to 316 new teachers and teacher aides and five new schools and 40 kindergartens. There is also $10 million for training in the booming Coal Seam Gas and Liquefied Natural Gas industries. There is an additional $72 million to provide disability support with good programs including autism services in regional areas, helping people with spinal cord injuries and transitioning disabled young people out of school. He also announced a new tax measure by excluding homes purchased through a disability trust from stamp duty. In Health the budget has increased from $5.35 billion to $10 billion in five years. The government will add 1,200 doctors, nurses and health professionals as well as building or upgrading 22 hospitals.

The government estimates that 100,000 people will move to Queensland in the next 12 months. That's a lot of people and Fraser said “we have to cater for that growth”. He announced a new Regional First Home Owner Boost, an extra $4,000 on top of the existing state funded $7,000 First Home Owner Grant to encourage people to move out of the South East. He also announced a $450 million new police academy as well as over 200 new police officers and spent $240 billion on yet another backwards looking project - the Gateway motorway upgrade south extension. Other roads to do well in the cash grab were the Port of Brisbane with $330 million, the Ted Smout Bridge to Redcliffe $315 million, the Forgan Smith Bridge in Mackay $148 million and the $190 million Port Access Road in Townsville.

Queensland’s 150th budget is much like the 149th that came before it. It is a carefully crafted grab-bag of token initiatives, old solutions and outright bribes that paper over the economic cracks but do little to address the State’s longer term needs: how to move to a 21st century economy as the population grows daily older. It will take a government with a lot more vision than the cautious Anna Bligh/Andrew Fraser administration to deliver on that promise. Such a government is nowhere in waiting in Queensland, however.

Andrew Fraser hands down Queensland budget 2009

Queensland Treasurer Andrew Fraser introduced his second budget into state parliament today with the state over half a billion dollars in the red. Fraser said the worst set of global economic circumstances in more than 75 years has resulted in rising unemployment and revenues from transfer duties, GST and royalties taking a battering. But just as the impact of the so-called federal “horror” budget was muted by judicious advanced leaking, most of the key items in Queensland’s budget were in the public domain before Fraser gave the details to his parliamentary colleagues in Brisbane today. The treasurer said today’s budget had a dual function: to support the economy during the financial crisis and to “chart a course for a new future beyond these dark hours.”

He announced a “colossal drop” in forecast revenue of more than $15 billion due to shortfalls in the key revenue streams of royalties, taxes and GST. This will result in a deficit of $574 million, which is actually a lot better than $1.5 billion deficit forecast in February but will still not return to surplus until 2015-2016. The state’s economy is forecast to contract by 0.25 of a percent in 2009-2010 before returning to modest growth the following year. Unemployment is also trending upwards from 6.50 percent in 2009-2010 rising to 7.25 percent the following year. This means an additional 175,000 people on the dole.

Fraser said the centre of the budget was an $18.2 billion capital works program with funding for roads, ports, schools, transport and other infrastructure. This capital outlay will support 127,000 full-time jobs. The Abbot Point coal terminal will be expanded at a cost of $305 million, there will be a Bundaberg ring road at $100 million, and $464 million will be spent on the Gold Coast Rapid Transit project. In Brisbane, $259 million goes towards the Gateway duplication and another $125 is spent on the new Houghton Highway Bridge. Disappointingly not much will be spent on public transport.

Hospitals and health facilities account for $1.3 billion of the total with new hospitals at Mackay (2013) and Gold Coast University Hospital (2012). There is also funding for a research facility at the new Queensland Children’s Hospital at Brisbane’s Mater. The budget provides for 645 more doctors, nurses and health practitioners, 350 more teachers and teacher aides, 200 more police and another 50 ambulance officers.

There will also be $300 million for new school facilities plus another $150 million for climate change and Barrier Reef protection packages. $57 million will go to a “green army program” to create 3,000 jobs by improving waterways, beaches, national parks and green spaces. The government also abolished stamp duty for vacant land for first home buyers who purchase vacant land to build their first home up to $250,000 with a further concession to land up to a value of $400,000.

To pay for all of this, the government announced its revised fiscal principles designed to save $5.4 billion over four years. This figure does not include asset sales. As flagged earlier, the 8c fuel subsidy will be abolished saving $2.4 billion. There will also be the promised “public sector efficiency dividend” of $280 million a year from 2009-10 which the government says will not impact on “front line service delivery”. But what will go are local government grant and subsidy programs. Motor vehicle registration will increase from 1 June. The tax rate on casino gaming machine wins will go from 10 percent to 20 for Townsville and Cairns and from 20 percent to 30 percent for Brisbane and the Gold Coast. Apprentice and trainee wages will be excluded from payroll tax and the government will extend a further 25 percent rebate on these wages. But Fraser said the government’s own wage bill will only increase by 2.5 percent with MPs to continue their pay freeze.

The budget announced more details on the controversial asset sales which are not factored into budget estimates. The program has a strong export focus and will involve the sale of Forestry Plantations Queensland’s softwood business (and possibly also its hardwood plantations business), Queensland Motorways Limited, the Port of Brisbane, Queensland Rail’s coal businesses and Abbot Point Coal Terminal. The sales will be staggered over three to five years and the government expects them to raise $15 billion. The sale will also mean that $12 billion in required capital investment over the next five years will be avoided – however it is not certain that this capital investment is factored into the likely sale price.

The Queensland Greens have come out against the asset sales saying that control of these utilities is essential in making a smooth transition to a low carbon economy. The Greens will also closely scrutinise the climate change components of the budget. The government supports the CPRS (Carbon Pollution Reduction Scheme) and in its Toward Q2: Tomorrow's Queensland document has set a target of cutting a third of Queensland’s carbon footprint by 2020. Key budget initiatives include the Solar Hot Water Program, investment in the Geothermal Centre of Excellence and $7 million towards the development of a 10MW solar thermal power station at Cloncurry. But these measures are dwarfed by the $300 million Clean Coal Fund which is of dubious environmental benefit but keeps the government’s industry friends happy. Anna Bligh’s government has a long way to go before it is weaned off its love affair of coal.

Time to get rid of Queensland’s faulty fuel subsidy

In a rare outbreak of policy sense, Premier Anna Bligh signalled yesterday that Queensland's eight cents a litre fuel subsidy could be finally be scrapped in June’s state budget. In the 21st century it defies belief that any government would subsidise petrol prices. Yet the Bligh Government had repeatedly assured the scheme would be protected during the election campaign to avoid being wedged on the issue by the Opposition. Now that the election is safely behind her, Bligh is looking for options to get out of that commitment. She said that although she wanted to keep every election promise, her overriding promise was to protect jobs. "To do that we've got to look at some pretty tough decisions and right now everything is on the table,” she said. “That means things like the fuel subsidy have to be considered."

The government may have been encouraged by an editorial in the Courier-Mail in January (incidentally, well before the election) which called the subsidy a luxury Queensland cannot afford. However, the usual vested interests have come out against scrapping the subsidy. Nick Behrens of the Queensland Chamber of Commerce and Industry says Queensland businesses will lose their competitive advantage while Agforce president John Cotter says people living in rural areas would be hit hard if it was removed. Opposition Leader John-Paul Langbroek somewhat bizarrely described the subsidy as a "core service" and claimed losing it would cost Queenslanders $250 to $300 a year on average. And RACQ general manager Gary Fites also weighed in saying "fuel prices will rise by nine cents a litre if the government wants to remove the subsidy.”

Fites is exaggerating but the chorus of opposition shows the difficulty Bligh will have to overcome to abolish the subsidy. Andrew Bartlett says the state government is dealing with the dilemma of dealing with bad policy that is electorally popular. Bartlett says the $600 million a year scheme is an “absurd, expensive program” however, he also says we only have ourselves to blame: “[We often call] for strong action while opposing anything that we feel will make us personally worse off,” says Bartlett “If more people were prepared to speak out in support of good policies that we know are unpopular, it might slightly reduce the need for governments to make quite so many of those promises in the first place.”

This particular promise dates back to the Borbidge coalition government in 1997. They introduced the subsidy after a federal High Court decision prevented the states and territories from collecting business franchise fees on fuel, tobacco and alcohol. In response the Howard Government imposed a surcharge of 8.1 cents per litre on the rate of customs and excise duty and returned surcharge revenue to states and territories. Because Queensland never had a fuel tax, the state government reached an agreement with the Commonwealth and the fuel industry to provide an 8.534c a litre subsidy for retailers to pass the benefit to consumers.

However, inquiries have found that the whole eight cents is not fully passed on to the motorist. In 2007 a Commission of Inquiry led by Bill Pincus (note: the actual report has been moved from the Queensland Government web site and is not available at the time of writing) found that the fuel subsidisation was deeply flawed and conflicted with policies to lower transport greenhouse gases. He also found more than $100 million a year of the $541 million scheme was not being passed on to motorists. Pincus found no evidence of criminal behaviour. "In the main, the subsidy was simply regarded as a component of the cost of fuel and was otherwise disregarded," he said in the report. He recommended the laws be repealed or else incorporate a provision to publish "reference prices".

Neither recommendation went anywhere. In June 2008 the Bligh government considered a plan where drivers would swipe a bar code on their licence at the point of sale to receive the full subsidy. But no one seemed happy about this idea. Civil libertarians warned of privacy concerns. Transport workers thought that interstate truck drivers would suffer while tourist operators said the scheme would deter holidaymakers. Pincus also came out against it saying retailers would simply raise their prices to maintain profit margins.

Given the political difficulties of removing the scheme entirely, perhaps the most palatable proposal is that of economist John Quiggin’s which has been endorsed by the RACQ. Quiggin suggests the government gradually phase-out the subsidy over four to five years and redeploy the savings to service borrowings to fund road and public transport infrastructure. The annual reduction in the subsidy would be 1.6708 cents per litre with consequent fuel price increases of about 1.84 cents per litre per year. Each cut would release about $100 million to service borrowings for additional road and public transport infrastructure. This amount would also repay debt of $1,000 million over a term of 15 years at an interest rate of 6 per cent. Perhaps most importantly, this “death of a thousand cuts” for the subsidy would result in the least amount of electoral (and media) pain.

Wayne Swan hands down the recession budget

Wayne Swan has handed down his so-called “horror” second budget in the middle of a global economic crisis that has wiped $210 billion from budget revenues. There is some confusion as to the exact size of the budget deficit as the Treasurer deliberately did not mention in his budget speech to avoid giving the opposition a free sound byte. But whether it is $57.6 billion according to The Australian or $53 billion according to Crikey it is still less than what most analysts predicted. However it is also big enough to mean that Australia will remain in the red until 2016 - at best. The budget itself produced few surprises in the details as almost all of the key announcements were strategically leaked in advance (apart from the surprise announcement to raise the retirement age to 67).

Swan called it a nation building budget for recovery and he set the scene in his economic background statement. Because of the recession, the global economy will contract by 1.5 percent this year and Australia’s will contract by 0.5 percent which will impact the unemployment rate. However, Swan claimed that without the two stimulus packages in December and April, Australia would have faced a 2 percent contraction and an additional 210,000 people on the dole queue.

The centrepiece of the budget is the $22 billion investment in infrastructure. $4.6b will be spent on improvements in the metropolitan rail systems with another $3.4b on roads. The Clean Energy initiative will get $4.5b for carbon capture projects from fossil fuel emissions, $1.5b for solar, and almost half a billion for a new research and development body called Renewables Australia. There will also be $5.8b for health and education infrastructure. This is on top of $5.7b for higher education reforms.

As flagged in advance, the aged pension is increasing by $32 a week at a cost of $14.2 billion over four years. But the pension age will gradually be increased to 67, at a rate of 6 months every two years beginning in 2017. Self-funded retirees will get access to a senior’s supplement. Meanwhile, the $731m paid parental leave scheme comes in 2011 with 18 weeks of paid leave for primary carers who earn less than $150,000. The first home owner’s grant has been extended to October.

On the down side, private health insurance will be more expensive. The rebate will be means tested on a sliding scale cutting out completely at $120,000. The government is also temporarily reducing its superannuation contribution in order to save $1.4 billion. The matching rate to employee contributions will drop from 150 per cent to 100 per cent for the next three years and will revert 125 per cent for 2012 13 and 2013 14 before returning to 150 percent in 2014-2015.

The government is also looking to save $880 million from 11,000 people by closing a loophole that allows people earning over $250,000 to claim back tax on loss making hobby businesses. Another $200 million will be saved by removing inconsistencies in taxing new employee share schemes.

Swan has also ended the exemption on overseas earnings in an attempt to save $675 million. Australians working overseas for over 90 consecutive days are no longer eligible for a general exemption which exempted them from paying any Australian income tax on their foreign employment income. This means that this income will now be taxed twice however Swan defends this on the grounds that “many foreign countries are lower tax jurisdictions”. However aid workers and some government employees (defence and police) will continue to enjoy the exemption.

Predictably the budget did not impress the Opposition. Opposition Treasury spokesman Joe Hockey said the projections for a return to budget surpluses were misleading and called it “casino economics”. Meanwhile the Australian Medical Association were unhappy with the private health rebate changes saying many Australians will pay more for health adding to their anxiety when they are already stressed about job security and the future.

Elsewhere, Annette Sampson at the Sydney Morning Herald says the superannuation tax concessions in the budget will also affect lower income earners. Ben Eltham at New Matilda says the budget is sound but politically risky and calls it "a gamble posing as prudence". Bernard Keane at Crikey called the budget “a flat affair” and says Swan was given an easy ride by the media. The Australian’s Samantha Maiden says the budget documents chart a path to recovery that is more upbeat than international forecasts. Economist John Quiggin also calls it an optimistic scenario. “Although complete collapse now seems unlikely, the prospect of a long period of depressed growth, similar to Japan in the 1990s, cannot yet be dismissed,” he said.

Leaks and lockups: a media anatomy of Federal Budget Day

Treasurer Wayne Swan hands down the long anticipated 2009 Federal Budget in parliament tomorrow night. Part of the ritual of the budget is the ritual of advance “leaks” usually by direct authority of the government to either soften the blow of cutbacks or provide good news on an otherwise slow part of the news cycle. And so despite Swan’s constant mantra about “not speculating” on specific budget measures, he chose Mother’s Day to announce 18 weeks parental leave would be introduced from January 2011 for those earning less that $150,000 a year. Meanwhile there have been a litany of advance warnings that items such as health insurance, health rebates, family payments and superannuation are all set for brutal cuts due to “the revenue hole”.

Apart from the stage-management of leaks, the other strange ritual is the infamous budget lock-up. For six hours tomorrow, the country’s finest journalistic minds will have the umbilical link to their mobile phones cut off so they can be holed up in a parliamentary chamber alongside opposition parliamentarians where they will be forced to read the mountains of budget materials cover to cover. While most journalists describe the lock-up as an expensive waste of time, no self-respecting member of the Canberra Press Gallery will be anywhere else tomorrow. And fringe outlets such as Crikey fought long and hard before finally gaining admittance to the lock-up last year.

In order to be involved in the lock-up, media organisations had to submit the names and positions of those requiring access to the Treasury by Friday 1 May. Treasury directions were that space was limited and media should restrict their own numbers “to a minimum” and they were also required to bear their own costs of participation and attendance. Whether News Ltd is adhering to the numbers is a moot point, as they are sending 90 people inside.

Access to the lock-up area begins tomorrow morning when media organisations are allowed to set up their equipment until 11.30am. An hour later, the journalists are allowed in. Every attendee must provide proof of employment and has signed the sinister sounding Form of Undertaking which is witnessed by a Treasury official. They will then pass through metal detectors to check for mobile telephones, pagers, handsets, computers and personal data assistants (PDAs) which must all be deposited outside the room. The doors are then hammered shut at 1.30pm and the journalists are kept inside for the next six hours.

No one is allowed to contact anyone on the outside until the start of the Treasurer's Budget Speech which doesn’t begin until 7.30pm (although a security guard will apparently escort people to the toilet if needed). The reporters have six hours to make sense of tonnes of budget books, press releases and analytics. No budgetary information is allowed to be made publicly available until it is publicly announced in the speech. Inside the lockup, the temporary prisoners are given access to the entire set of budget information in hard copy and the data is then loaded online at 7.30pm.

Because 7.30pm is late notice for the following morning’s newspapers, Treasury also has the concept of the secure sub-lock-up which applies to the print organisations only. Sub-editors can establish and use secure encrypted landlines located within their own headquarters for sub-editorial purposes. Here production staff, subs, layout designers and editors all re-engineer their Canberra reporters’ copy for the front pages under the watchful eyes of Treasury officials. Curiously, “journalists are not permitted” inside the sub-lock-ups though the edict does not take into account that most sub-editors and editors are also journalists.

Of course none of this expensive secrecy is at all necessary. The primary purpose is to enable the Government gain control of the initial news cycle. Writing in today’s media section of The Australian, Michael Wilkins says it is time to call a halt to the lock-up charade. He calls it an expensive, archaic practice that costs media organisations in excess of a million dollars for little reward. But Wilkins’ call is unlikely to be heeded any time soon. As he himself notes, “The Government rarely has [this] chance to hold the nation's journalistic leaders hostage within its walls, an opportunity during which officials can ply their take on the numbers to a captive audience searching for answers.” And for a government as obsessed as this one is with staying on message, that opportunity is too good to turn down.

Btw, Australia is not alone with this nonsense. Check out this story of the Canadian budget lock-up from January this year.

Queensland budget shows little long-term vision

Queensland Treasurer Andrew Fraser released his first budget today that showed a disappointing lack of vision for the future. With Labor well ahead in the state polls, Fraser and his boss Anna Bligh could have used the $36 billion budget as a blueprint for change. Instead, their package pandered to the usual vested fossil fuel interests, perpetuated the subsidisation of car drivers, and contained substantial smatterings of politically conscious middle class welfare.

Introducing the budget this morning, Fraser boasted that the budget delivered “massive injections of funding” to public hospitals and healthcare system and would fund “the biggest capital works program in the State's history”. But with the state’s net worth of $123 billion and a forecast of an $800 million operating surplus for the 2008-2009 financial year, Fraser did little for the environment or the promotion of alternative energy use. Instead, he dispensed his largesse on motorists, the coal industry and wealthier first time home buyers.

A whopping 40 percent of $17 billion capital works will be frittered away on an expanded road network. This includes the duplication of the Centenary Highway between Darra and Springfield (an area poorly serviced by public transport), a new highway bridge between Brighton and Redcliffe (while the long promised Redcliffe rail link plan gathers dust), the Gateway bridge duplication, the Airport link tunnel (while the perfectly good railway is underused and overpriced). Meanwhile the Government “Travelsmart” plan pays lip service to the idea of “successfully balancing growth with a quality of life and a healthy environment” with expansions to the northern busway and $700 million towards new rolling stock in Queensland Rail’s Brisbane network.

Fraser wasted $870 million on the continued bribery of the 8.354 cents fuel subsidy. Intriguingly however, he is introducing a new scheme whereby drivers can apparently have the discount applied at point-of-sale by presenting a driver’s licence “with a new barcode attached”. Presented as a scheme to ensure the bribe is paid “straight into motorists’ pockets”, it is not immediately apparent how this scheme will operate. Premier Anna Bligh said the government would consult with industry figures and other motoring bodies to ensure the proposal went ahead smoothly. In any case, this scheme is an unwarranted subsidisation of car drivers at the taxpayer’s expense and needs to be scrapped.

It was obvious in other ways this budget was made with more than an eye to the next state election. Queensland Labor were keen not to repeat the mistakes of its federal counterparts with a big blurb about “looking after seniors” on the first page of the budget highlights paper. The government increased the electricity rebate scheme from $145 to $165 a year and started a new reticulated natural gas scheme which will give a $60 a year discount to 50,000 pensioners and concession card holders. Pensioners will also be given a subsidy to protect them from the big hikes expected in water charges in South East Queensland.

Wealthier first time home buyers did well out of the budget. Fraser announced an increase in the first home buyer transfer duty exemption threshold from the current level of $320,000 to $350,000 from 1 July 2008, with a further increase to half a million dollars from 1 September 2008. This will take the threshold well beyond the median Queensland house price which to June 2007 varied from $370,000 in Brisbane to $420,000 on the Gold Coast and $450,000 in Noosa. This will bring 90 per cent of all first time home buyers into the scheme. While in theory it is laudable to support those starting out with a mortgage, it seems over the top that governments should be subsiding wealthier entrants to the tune of $10,000.

The “at a glance” graphs released by the government reveal how they can pay for all this pork barrelling. Queensland has the strongest balance sheet of all the states and the state economy is predicted to grow 4 percent in the next year despite the world downturn. Tax rates are $275 lower than the average for other states and territories. But Queensland success is tainted in that it is driven off fossil fuels. The state is effectively living off the back of its massive coal exports.

And despite Australia now signing up for Kyoto, Queensland shows no sign of winding down the coal industry. On the contrary, the budget has promised $575 million for additional track works on the coal network in Central Queensland, $70 million to increase the capacity of Abbot Point Coal Terminal near Bowen, $45 million to improve road networks in the Bowen Basin region and another $23 million for infrastructure works in the Gladstone area at Tanna in and Wiggan Island coal terminals.

One of the few good things that came out of the budget was the royalty tax rise on North West Shelf and Queensland coal miners. The previous 7 per cent Queensland royalty has risen to 10 per cent for all coal sold at more than $100 a tonne. The increase will add an additional $1.1 billion to state coffers. This list compiled by Stephen Mayne tracks the ownership and tax arrangements for Australia’s biggest resource projects and it shows that most states under-tax the multi-national companies that quarry the nation. So while Queensland should be applauded for keeping at least some of the resource boom profits in public hands, it desperately needs to consider the significant environmental challenges ahead. With the most recent Newspoll showing a 20 point lead to Labor over the disunited coalition, the Queensland Government can easily afford to look beyond next electoral cycle. Queensland deserves nothing less.