Tough decisions for tough times: Unemployment Public Enemy #1 in Major Economic Statement

09 December 2008

Treasurer Andrew Fraser has pledged to maintain the state’s $17 billion capital works program as the Bligh Government seeks to ward off a predicted rise in unemployment.

In handing down the Bligh Government’s Major Economic Statement, which incorporates the mid-year review of the Budget’s bottom line, Mr Fraser said that jobs were priority number 1 heading into 2009.

“The full brunt of the global financial crisis is likely to be felt in the first half of 2009 and that’s why we are committed to delivering our $17 billion capital works program – to help sustain jobs and growth.”

“The government’s massive $17 billion commitment has been maintained – and that means the 119 000 jobs the program supports will be maintained.

“Fighting unemployment is our number 1 policy priority heading into 2009 and that’s we have preserved the full value of the capital works program this financial year.”

The Major Economic Statement revised forecast unemployment to be 4.25% - up from the 3.75% forecast in the Budget.

Three new funding measures and a half billion savings initiative have been undertaken to help preserve the capital works program.

“There’s never a good time to increase revenues, but these decisions are necessary to return the budget to surplus by the end of the forward estimates.

“With consensus predicting the eye of the storm at the start of 2009, the increases have been timed not to commence until 1 July 2009.

Mr Fraser said the government would record a “very skinny” surplus of $54 million for 2008-09 but was forecasting deficits the next two years before the budget returned to surplus in 2011.

“We have decided to put the Budget into deficit to maintain the capital program – because that maintains jobs. Our plan charts a course to return to surplus by the end of the forward estimates.

The three measures will raise $337 million next financial year as the Bligh Government counteracts a revenue loss of $4.3 billion from the budget’s forecasts for the forward estimates.

“An increase in car registrations from 1 July 2009 will raise $194 million and will keep the roads building program on track,” Mr Fraser said.

“The increase will fund our commitment to building and upgrading Queensland’s road network.

“Without this increase we would have faced cutting back on our roads program. That’s not the right thing to do as we face an economic downturn. We need to keep the program moving and that’s why he taken this decision.

“I’ll be the first person to say the increase is unfair: Queenslanders didn’t create the global financial crisis but we have to deal with its consequences.

“There is nothing nice about the global financial crisis.”

The Budget forecast $991 million would be raised this financial year from motor vehicle registrations, as part of the Main Roads department capital works budget of $3.2 billion.

Mr Fraser also confirmed that the discount tax rates applied to gaming machines in the state’s four casinos would be reduced, raising a further $36m while a new surcharge on land tax holdings above $5m would raise $93m next financial year.

The decision on casino gaming tax rates came after a review of the government’s tax concessions as part of Cabinet Budget Review Committee’s preparations of the statement.

“Casinos have enjoyed discounts on their tax rates as part of the arrangements entered in to fund their development.

“The rates will be lifted by 10%, but will remain below the rates paid by hotels and clubs.”

“A new rate of 30% will apply in Brisbane and on the Gold Coast, while the rate in Townsville and Cairns will be 20%, preserving the differential in place.”

Mr Fraser also said a surcharge of 0.5% on land holdings above $5m was also necessary.

“In deciding which revenue measures to undertake, we looked at our prevailing tax rates.

“Our current land tax regime is judged by the Commonwealth Grants Commission to be 45% below par.

“In fact, we are penalised by the Commonwealth Grants Commission for having such a generous regime.”

With transfer duty falling a massive $891 million, Mr Fraser said the land tax measure was a tough call but a necessary decision.

The revenue measures were being introduced along with new savings measures as the Bligh Government sought to counter-act the massive drop in revenues from the global financial crisis.

“I introduced a $60 million productivity dividend for this year in the June Budget - which has been achieved.

“The planned $300 million in savings over the forward estimates has been increased by another $200 million.

“We are targeting any excess fat anywhere – with spending on publications and communications a prime target.

A planned increase to MP’s allowances had also been cancelled, Mr Fraser said.

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