Ministerial Statement - Treasurer

Australia did not create the global financial crisis. Australian financial institutions didn’t gorge on the false profits of sub-prime mortgage lending practices. It wasn’t Australian Governments or Australian regulators that so catastrophically missed the mark.

But while we haven’t created the crisis, we are being confronted with its consequences.

We are an island nation, but we are not barricaded from the rest of the world. Indeed in a modern global economy, its fate is our fate.

All governments around Australia are facing the ravages of falling revenues and lower growth prospects. We did not create these circumstances, but we must deal with the consequences. Each of us – each government … each business and each individual must confront the spillover of the global financial crisis from the banking boardrooms now into the real economy.

This is no longer just a global financial crisis, but an emerging real economic crisis.

The meetings of Australia’s Treasurers through the Ministerial Council for Commonwealth-State Financial Relations and the Council of Australian Governments focussed solely on the dramatically different outlook for the Australian economies.

The commitment of the federal government to increase funding to key policy priorities of health and education is welcome. With $40 billion wiped off the federal budget surpluses, the additional funding represents a responsible investment in maintaining frontline services.

Health was, and remains, our number one priority. Investments in housing and education are important as we face short and long term economic challenges. Every cent of this money is applied to the states for specific expenditure, it directly funds health, education, housing – it won’t sit idle on our bottom line. As the Premier said, it will be put to work

As we finalise our forecasts for the presentation of the Major Economic Statement, incorporating the Mid Year Review to be delivered next Tuesday, we are facing reductions in net state taxes and royalties of just on $3 billion and a drop in GST revenues of $1.3 billion across the forward estimates. That’s $4.3 billion wiped off future revenues across the budget’s forecasts.

We have further revised downwards our forecast for transfer duty, and expect it to now be more than 25% below in this financial year. Our budgeted surplus of $809 million faces being completely wiped out. It gets tougher next year, and the year after.

That means tough decisions need to be made. Decisions needed to maintain frontline services, maintain our investment in infrastructure … decisions to maintain activity, and support growth and support jobs in the economy.

The bottom line Mr Speaker is this: we are prepared to sacrifice our bottom line to maintain growth in the Queensland economy, to maintain capital works and to maintain jobs as we face the full brunt of the unfolding global economic crisis.

We are prepared to undertake a deficit budget position to support the economy. When I hand down the Mid Year Review next week, it will budget for a deficit next financial year. Next year will be the toughest for generations, and we need to set the course now. This necessitates a deficit. And likely in the year after also.

It will also provide, however, the pathway out of deficit, as we repair our position for the future. We are prepared to undertake a short-term deficit to deal with the immediate impacts of the global financial crisis, but we are equally determined to undertake the decisions to soundly manage our finances for the medium and the 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. It’s the hard thing to do politically, but the right thing to do for our economy. We must also take the tough political decisions to pull out of temporary deficit. We will take those decisions.

What matters here Mr Speaker are the jobs of Queenslanders, not the political sanctity of future budget surpluses. We are prepared to put our jobs on the line, to give Queenslanders every chance to stay in theirs.

A budget surplus next year will be cold comfort to Queenslanders cast onto the unemployment queues. Governments have a role to play here, and we intend to do away with the political orthodoxy to do everything we can to fight off the fallout from the crisis.

As we prepare to sustain our economy through a short term budget deficit, we must be prepared to take the hard decisions, unpopular decisions to provide the path out of deficit and into a sustainable position for the future.

We are in for tough 2009. A whole generation of people will confront the harsh reality of an economic downturn for the first time – the scale of which hasn’t been seen for generations.

Now is a time when economic management requires bold leadership. Our government intends to do just that.