Queensland economy fighting back against COVID-19

Queensland’s economic rebound from COVID-19 is forecast to be almost twice as strong as the Australian average, according to the Palaszczuk Government’s COVID-19 Fiscal and Economic Review released today.

Treasurer Cameron Dick said while COVID-19 has wrought significant damage on jobs and businesses in Queensland and around the world, there is reason for optimism as the Palaszczuk Government’s plan to Unite and Recover for Queensland Jobs continues to deliver for our state.

“With unemployment forecast to peak in the December quarter at 9%, Treasury is forecasting an economic rebound into calendar 2021,” the Treasurer said.

Queensland’s Gross State Product is forecast to grow by 3¾% in calendar year 2021, compared to an RBA forecast of national GDP to grow by 2%.

This follows a forecast 2½% fall in Queensland GSP in calendar year 2020, compared to an RBA forecast of a 4% fall in national GDP.

“We know that our strong health response has laid the foundation for our economy to ease internal restrictions, benefiting businesses right across the state,” the Treasurer said.

“As we deliver our plan for economic recovery, boosting competitiveness and resilience of the Queensland economy will be key, so today I am announcing a range of measures to:

• support business investment and jobs;
• ease the burden on small business; and
• ensure Queensland’s balance sheet works as hard as it possibly can.”

As the crisis is still ongoing, there is a significant degree of uncertainty around fiscal parameters beyond the short term. 

Given this, and consistent with the position taken by the Morrison Government, the COVID-19 Fiscal and Economic Review provides a two-year view.

“Since the beginning of this year, international and domestic economic conditions have been changing on an almost daily basis, rendering the normally difficult practice of economic forecasting that much harder – a fact that has been recognised by Reserve Bank Governor Philip Lowe and Federal Finance Minister Senator Mathias Cormann,” the Treasurer said.

Employment

Unemployment is forecast to peak at 9% in the December quarter 2020, improving to 8% by June quarter 2021, with jobs growth partially offset by people re-entering the labour force as opportunities improve.

ABS Payroll data shows key tourism regions the Gold Coast, Sunshine Coast and Cairns have borne the brunt of job losses since the Morrison Government closed national borders and imposed international travel restrictions early in the pandemic.

The number of employee jobs in these regions has fallen by 6.0%, 4.6% and 4.7%, respectively, between 14 March and 8 August.

Operating Position

The General Government Sector net operating deficit for 2019-20 is expected to be $5.9 billion, compared to the surplus of $151 million forecast at MYFER. 

The deficit for 2020-21 is forecast at $8.1 billion, a slight improvement of approximately $250 million on the forecast in the July fiscal update.

Revenue

The domestic and global economic downturn is substantially impacting Queensland’s revenue sources, as is the case in other jurisdictions. GST, royalties and land rents, and taxation receipts are all forecast to fall significantly.

The combined impact of these key revenue revisions is estimated at $6.7 billion across 2019-20 and 2020‑21 compared with MYFER.

By comparison, following the GFC, key revenues were $5.2 billion lower over the period 2008-09 to 2009-10 compared with pre-GFC 2008-09 Budget Forecasts.

Total General Government Sector revenue in 2019-20 was $57.7 billion, $2.1 billion (or 3.5%) lower than in 2018-19, and $2.2 billion (3.7%) lower than estimated at the 2019-20 MYFER.

In 2020-21, total General Government Sector revenue is estimated to be $56.2 billion. The decrease of $5.5 billion (or 8.9%) compared with the 2019-20 MYFER forecast reflects the expected impact of the COVID-19 pandemic leading to sharp declines across all major revenue lines.

Government Borrowings

General Government Sector

General Government Sector borrowings are estimated to be $60.903 billion in 2020-21, $18.165 billion more by 30 June 2021 than projected in the 2019-20 MYFER.

This is predominantly due to the impact of the COVID-19 support and recovery efforts, as well as cash flow revisions to GST, royalties and taxes of $6.7 billion.

Pre-COVID, Queensland had lower net debt than NSW and Victoria – reaffirming our strong position heading into the pandemic.

Public Non-financial Corporations

Public Non-financial Corporation debt is primarily held by government-owned corporations and is supported by income generating assets, including key pieces of economic infrastructure. Public Non-Financial Corporation debt is estimated to be $41.1 billion in 2020‑21.

Non-financial Public Sector

The Non-financial Public Sector (NFPS) is the consolidation of the General Government and the Public Non-financial Corporations Sectors, with transactions between these sectors eliminated.

Borrowings of $101.962 billion are projected for 30 June 2021 in the NFPS, $18.209 billion more than the 2019-20 MYFER estimate, reflecting the increase in the General Government Sector.

The Government is also allocating a further $4 billion, funded from new borrowings, for further economic stimulus in the next term of government to support jobs and economic growth, and to strengthen frontline services.

$1 billion of the new borrowings will be for two funds announced today and will be held by Government Owned Corporations.

Future Fund

As part of its Savings and Debt Plan, the Government has established the Queensland Future Fund and its first sub-fund, the Debt Retirement Fund.

With legislation passed in August 2020, the value of Debt Retirement Fund (DRF) will offset against the State’s debt for credit rating agency metrics.

The interest and investment return of the DRF will be reinvested in the fund, meaning it will grow over time to further offset borrowings. 

Withdrawals from the fund will only be used for paying down debt. 

The Government has commenced due diligence on a range of assets to be transferred into the DRF, based on their growth potential.

The Titles Registry, government-owned shares, and the $1 billion from the Defined Benefit Fund have been factored into this C19-FER as they are planned to be transferred to the DRF by 30 June 2021, exceeding the initial target with a projected balance of $5.67 billion.

The Defined Benefit Fund will continue to remain in surplus.

2020-21 Budget

The Treasurer also noted that while there is not currently enough financial certainty to allow for four years of economic forecasts, should the Palaszczuk Government be privileged to be re‑elected in October, a full budget will be delivered in the week commencing Monday 30 November 2020.

“Given the importance of Federal payments, until the Federal Government deliver the 2020-21 budget, State Governments are unable to finalise their own budgets,” the Treasurer said.

Media Contact:          Geoff Breusch 0417 272 875