The Queensland government could run up to five budget deficits as it tries to boost private investment as the state recovers from the coronavirus recession.
Treasurer Cameron Dick says the state is gradually recovering from the coronavirus recession with an uptick in employment, housing approvals, retail trade and household loan growth.
However, he says the fragile domestic recovery needs to be supported by the government, which may need to run another deficit beyond the four forecast until 2023/24.
“People look to governments to do many things, but most of all, they look to governments to deliver their commitments – to do what they have said they will do,” Mr Dick told a CEDA forum in Brisbane on Tuesday.
“And that’s what this budget does.
“After five consecutive surpluses from the Palaszczuk government, it is the first of four or five budgets that will be in deficit.
“In that way, it was no different to the budgets delivered so far by every other state with the exception of Western Australia, which continues to ride the wave of record iron ore prices.”
The treasurer said Queensland’s domestic economic performance indicated that the conditions could soon encourage private sector investment.
He admitted that the recovery was not helping all businesses and said the government was open to easing conditions economic further, potentially with further economic support or cutting red and green tape.
“We need to look at what other measures we can take to help businesses operate more efficiently, especially if those measures don’t further reduce our revenue or increase government expenditure,” Mr Dick said.
The treasurer also warned that the international outlook was not as promising as Queensland’s domestic economic indicators.
He said a lack of international tourism and plummeting demand for coal had caused a 22 per cent slump in merchandise exports.
Low coal demand, weighing on prices and export volumes, is expected to cause a 45 per cent slump in Queensland’s royalty revenue in 2020/21.
Mr Dick says royalties will have fallen by $4 billion by 2023/24, with GST receipts down $3.8 billion and tax revenue down $4.5 billion.
Last week’s state budget notes that falling coal royalties are related to China’s import restrictions, but coal prices and volumes have actually been trending lower since 2019.
Weaker global economic growth has further reduced coking coal demand for steelmaking.
Demand for Australian thermal coal has been hit by South Korea and Japan phasing out coal-fired power plants to limit air pollution and act against climate change, respectively.
International coking coal prices are forecast to partially recover by 2023/24, but remain below the US$150 per tonne average over the decade.
Queensland Treasury predicts thermal coal prices to be $US70 per tonne in four years time, up slightly from $US68 in the current financial year, but stubbornly below the price of US$88 in 2019/20.